SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
BOSTON LIFE SCIENCES, INC
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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Notes:
BOSTON LIFE SCIENCES, INC.
31 NEWBURY STREET, SUITE 300
BOSTON, MASSACHUSETTS 02116
(617) 425-0200
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 12, 1998
TO ALL HOLDERS OF SHARES OF COMMON STOCK AND SERIES A CONVERTIBLE PREFERRED
STOCK:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the
"Meeting") of BOSTON LIFE SCIENCES, INC. (the "Company") will be held at The
Ritz-Carlton Hotel, 15 Arlington Street, Boston, Massachusetts 02116 on June 12,
1998 at 10:00 a.m. for the following purposes:
1. To consider and act upon a proposal to elect seven directors for a term
ending at the next Annual Meeting and until each such director's successor
is duly elected and qualified.
2. To consider and act upon a proposal to approve the adoption of the
Company's 1998 Omnibus Stock Option Plan.
3. To consider and act upon a proposal to approve the amendment and
restatement of the Company's Amended and Restated 1990 Non-Employee
Directors' Non-Qualified Stock Option Plan.
4. To consider and take action upon such other business as may properly come
before the Meeting or any postponements or adjournments thereof.
Management presently knows of no other business to be presented at the
Meeting. If any other matters come before the Meeting, the persons named in the
enclosed proxy will vote in accordance with their judgment in such matters.
The Board of Directors has fixed April 14, 1998 as the record date for the
Meeting. Only those stockholders of record at the close of business on the
record date will be entitled to notice of and to vote at the Meeting or any
postponements or adjournments thereof. A complete list of stockholders entitled
to vote at the Meeting will be open to the examination of any stockholder, for
any purpose germane to the Meeting, during ordinary business hours, for a period
of at least ten days prior to the Meeting at the principal executive offices of
the Company listed above. Directors will be elected by a plurality of the votes
cast by holders of Common Stock and Preferred Stock (voting together with the
Common Stock as a single class on an as converted basis). The affirmative vote
of holders of a majority of the shares of Common Stock and Preferred Stock
(voting together with the Common Stock as a single class on an as converted
basis) present in person or by proxy, and entitled to vote is required to
approve the other proposals.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the accompanying Proxy Statement for further information
with respect to the business to be transacted at the Meeting. To ensure that
your vote is counted, please complete, date and sign the enclosed proxy and
return it promptly in the enclosed envelope, whether or not you plan to attend
the Meeting in person. A self-addressed, postage paid envelope is enclosed for
your convenience. If you do attend the Meeting, you may then withdraw your
proxy and vote your shares in person. In any event, you may revoke your proxy
prior to its exercise. Shares represented by proxies which are returned
properly signed but unmarked will be voted in favor of each proposal.
By Order of the Board of Directors,
Joseph Hernon
May 6, 1998 Secretary
Boston, Massachusetts
YOUR VOTE IS IMPORTANT.
PLEASE FILL IN, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING.
NO POSTAGE IS NECESSARY IF THE ENVELOPE IS MAILED IN THE UNITED STATES.
BOSTON LIFE SCIENCES, INC.
31 Newbury Street, Suite 300
Boston, Massachusetts 02116
Telephone: (617) 425-0200
Telecopy: (617) 425-0996
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Boston Life Sciences, Inc. (the
"Company") of proxies to be voted at its Annual Meeting of Stockholders and at
any adjournments thereof (the "Meeting"), which is scheduled to be held on June
12, 1998 10:00 a.m. at The Ritz-Carlton Hotel, 15 Arlington Street, Boston,
Massachusetts 02116, for the purposes set forth in the accompanying notice of
meeting. It is expected that this proxy statement, the foregoing notice and the
enclosed proxy card are first being mailed to stockholders entitled to vote on
or about May 6, 1998 Sending a signed proxy will not affect a stockholder's
right to attend the Meeting and vote in person since the proxy is revocable. Any
stockholder giving a proxy has the power to revoke it by, among other methods,
giving written notice to the Secretary of the Company at any time before the
proxy is exercised, delivering a duly executed proxy bearing a later date, or
attending the Meeting and voting in person.
When your proxy card is returned properly signed, the shares represented
will be voted in accordance with your directions. The Board knows of no matters
that are likely to be brought before the Meeting, other than the matters
specifically referred to in the notice of the Meeting. If any other matters
properly come before the Meeting, however, the persons named in the enclosed
proxy, or their duly appointed substitutes acting at the Meeting, will be
authorized to vote or otherwise act thereon in accordance with their judgment in
such matters. In the absence of instructions, the shares represented at the
Meeting by the enclosed proxy will be voted "FOR" the seven nominees of the
Board in the election of directors; "FOR" the approval of the adoption of the
Company's 1998 Omnibus Stock Option Plan; and "FOR" the approval of the
amendment and restatement of the Company's Amended and Restated 1990 Non-
Employee Directors' Non-Qualified Stock Option Plan.
SOLICITATION OF PROXIES
The expense of the proxy solicitation will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited in person or by
telephone or telecopy by officers or other regular employees of the Company,
without additional compensation. The Company is required to pay the reasonable
expenses incurred by record holders of the Company's common stock, $0.01 par
value per share (the "Common Stock") and Series A convertible preferred stock,
$100.00 stated value (the "Preferred Stock"), who are brokers, dealers, banks or
voting trustees, or other nominees, for mailing proxy material and annual
stockholder reports to any beneficial owners of Common Stock and Preferred Stock
they hold of record, upon request of such record holders.
1
VOTING SECURITIES
Holders of record of the Company's Common Stock and Preferred Stock as of
the close of business on April 14, 1998 (the "Record Date"), will be entitled to
notice of and to vote at the Meeting and at any adjournments thereof. As of the
Record Date there were 13,029,969 shares of Common Stock and 27,145 shares of
Preferred Stock outstanding. On an as converted basis, the Preferred Stock is
entitled to cast votes equivalent to 476,061 shares of Common Stock.
Accordingly, there are a total of 13,506,030 shares entitled to vote. The
holders of the Company's Common Stock and Preferred Stock may vote on all
matters presented to the Meeting and will vote together as a class. Each
outstanding share of Common Stock entitles the holder to one vote. Each
outstanding share of Preferred Stock (on an as converted basis as described
above) entitles the holder to the number of votes equal to the number of shares
of Common Stock issuable upon conversion of the Preferred Stock as of the Record
Date. Each share of Preferred Stock is convertible into approximately 17.5
shares of Common Stock.
The presence, in person or by proxy, of the holders of at least a majority
of the outstanding Common Stock and Preferred Stock (on an as converted basis)
entitled to vote is necessary to constitute a quorum for the taking of any
action at the Meeting.
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SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
MANAGEMENT
As of March 31, 1998, the following directors or director nominees, named
executive officers and directors and executive officers as a group, beneficially
own (as defined in regulations issued by the Securities and Exchange Commission
(the "SEC")) the amounts of the Company's outstanding Common Stock set forth
below. No executive officer, director, or director nominee owns any Preferred
shares.
Name of Amount and Nature of Percent
Beneficial Owner(1) Beneficial Ownership (2) of Class (2)
- ------------------- -------------------------- ------------
Colin B. Bier, Ph.D.
Director 17,341(3) *
Edson D. de Castro
Director 78,518(3) *
Adrian Gerber
Director Nominee, Executive Vice President,
Business Development and Corporate
Planning(8) -
Joseph P. Hernon
Chief Financial Officer and Secretary 40,167(3) *
S. David Hillson, Esq.
Chairman of the Board,
President and Chief
Executive Officer 393,822(4) 2.9%
Steve H. Kanzer, CPA, Esq.
Director 58,839(5) *
Marc E. Lanser, M.D.
Director, Executive Vice President
and Chief Scientific Officer 357,509(6) 2.7%
Ira W. Lieberman, Ph.D.
Director 33,994(5) *
E. Christopher Palmer, CPA
Director 33,994(5) *
All directors and executive
officers as a group (8 persons) 1,014,184(7) 7.3%
___________________
* Represents less than 1% of the outstanding shares.
(1) Except as otherwise specified in footnotes to this table, the persons named
in this table have sole voting and investment power with respect to all
shares of Common Stock owned. The information in the table was furnished
by the owners listed.
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(2) The amounts of shares owned and the percentages in this table are based on
the number of shares of Common Stock outstanding as of March 31, 1998 or
issuable upon the exercise of options which are exercisable or which will
become exercisable within 60 days of March 31, 1998.
(3) Consists of shares of Common Stock issuable upon exercise of options.
(4) Includes 392,302 shares of Common Stock issuable upon exercise of options.
(5) Includes 26,394 shares of Common Stock issuable upon exercise of options.
(6) Includes 174,837 shares of Common Stock issuable upon exercise of options,
and 20,321 shares held in trust for the benefit of his children.
(7) Includes 782,347 shares of Common Stock issuable upon exercise of options.
No executive officer or director owns any shares of Preferred Stock.
(8) Mr. Gerber is a nominee for director and became Executive Vice President,
Business Developent and Corporate Planning on May 1, 1998.
PRINCIPAL STOCKHOLDERS
As of March 31, 1998, the following person was known to the Company to be
beneficial owner (as defined in regulations issued by the SEC) of more than five
percent of the Company's outstanding Common Stock and/or Preferred Stock (on an
as converted basis).
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner(1) Beneficial Ownership(2) of Class (2)
- -------------- ---------------------- ----------------------- ------------
Common Stock Lindsay A. Rosenwald, M.D. 696,010 5.0%
and c/o Paramount Capital, Inc.
Preferred Stock(3) 375 Park Avenue
Suite 1501
New York, NY 10152
____________________
(1) Except as otherwise specified in footnotes to this table, the persons named
have sole voting and investment power with respect to all shares of Common
Stock or Preferred Stock owned. The information in the table was furnished
by the listed owner in reports provided to the Company and through filings
with the SEC or through information otherwise available to the Company.
(2) The amounts of shares owned and the percentages in this table are based on
the number of shares of Common Stock and Preferred Stock (on an as
converted basis) outstanding as of March 31, 1998 or which are issuable to
the persons listed upon the exercise of certain warrants and options which
are exercisable or will become exercisable within 60 days of March 31,
1998.
(3) Includes 262,941 shares of Common Stock issuable upon the exercise of
warrants and 6.69115 units of the Company (which consists of 6,691 shares
of Preferred Stock, representing 19.8% of the total Preferred Stock
outstanding, which are convertible into approximately 117,345 shares of
Common Stock and warrants to purchase 16,728 shares of Common Stock)
issuable upon exercise of a unit purchase option. Dr. Rosenwald's common
stock and warrant holdings, all of which are currently exercisable,
represent 4.3% of the common stock outstanding. The 5.0% and 4.3% numbers
indicated herein and above do not include 265,527 shares of Common Stock
beneficially owned by Dr. Rosenwald's spouse and by trusts for the benefit
of his minor children, of which his spouse is the sole trustee and as to
which he disclaims beneficial ownership. If these shares were included in
the calculation, the 5.0% would increase to 6.9% and the 4.3% would
increase to 6.3%.
4
Information relating to Dr. Rosenwald is based on information that was
furnished by Dr. Rosenwald in a Schedule 13G filed with the SEC pursuant to
Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended
(the "1934 Act") dated February 1, 1996 and other information available to
the Company.
VOTE REQUIRED FOR ELECTION OF DIRECTORS, APPROVAL OF THE ADOPTION OF THE
COMPANY'S 1998 OMNIBUS STOCK OPTION PLAN AND APPROVAL OF THE AMENDMENT AND
RESTATEMENT OF THE COMPANY'S AMENDED AND RESTATED 1990 NON-EMPLOYEE
DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN
At the Meeting, seven directors will be elected. Directors will be elected
by a plurality of the votes cast by holders of the Common Stock and Preferred
Stock (on an as converted basis), voting together as a class, represented in
person or by proxy at the Meeting. Votes withheld with respect to the election
of directors will be counted for the purpose of determining whether a quorum is
present at the Meeting but will not be considered as votes cast and will have no
effect on the result of the vote for directors.
Approval of the adoption of the Company's 1998 Omnibus Stock Option Plan
and the amendment and restatement of the Company's Amended and Restated 1990
Non-Employee Directors' Non-Qualified Stock Option Plan, and of any other
proposals will require the favorable vote of a majority of the Common Stock and
Preferred Stock (on a converted basis), voting together as a class, represented
in person or by proxy, and entitled to vote at the Meeting. The Company is not
aware of any matter, other than as referred to in this proxy statement, to be
presented at the Meeting. Abstentions with respect to the approval and adoption
of the Company's 1998 Omnibus Stock Option Plan and the amendment and
restatement of the Company's Amended and Restated 1990 Non-Employee Directors'
Non-Qualified Stock Option Plan, and of any other proposals will be counted for
the purpose of determining whether a quorum is present at the Meeting and as
votes cast, and will have the effect of a no vote. Broker non-votes with respect
to all proposals will be counted in determining the presence of a quorum and
will not be considered as present and entitled to vote, and thus will have no
effect on the results of any such vote on the proposed approval and adoption of
the Company's 1998 Omnibus Stock Option Plan and the amendment and restatement
of the Company's Amended and Restated 1990 Non-Employee Directors' Non-Qualified
Stock Option Plan.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Company's Board currently consists of seven directors. At the Meeting,
the stockholders will elect seven directors for a term ending at the next
Meeting and until each such director's successor is duly elected and qualified.
The table below sets forth the name of each person nominated by the Board
to serve for a term expiring on the date of the next annual meeting and until
his respective successor is elected and qualified. All of the nominees except
Mr. Gerber are currently directors of the Company for terms expiring at the
Meeting. Each nominee has consented to be named as a nominee and, to the present
knowledge of the Company, is willing and able to serve as a director, if
elected. Should any of the nominees not remain a candidate at the end of the
Meeting (a situation which is not expected), proxies solicited hereunder will be
voted in favor of those who remain as candidates and may be voted for substitute
nominees, unless the Board determines to reduce the number of directors. Unless
contrary instructions are given on the proxy, the shares represented by a
properly executed proxy will be voted "FOR" the election of Colin B. Bier,
Ph.D., Edson D. de Castro, Adrian Gerber, S. David Hillson, Esq., Marc E.
Lanser, M.D., Ira W. Lieberman, Ph.D., and E. Christopher Palmer, CPA.
5
Nominees for Additional Term Age Year First Elected a Director*
- ---------------------------- --- -----------------------------
Colin B. Bier, Ph.D. (1) (3) 52 1996
Edson D. de Castro (2) 59 1993
Adrian Gerber 60 -
S. David Hillson, Esq. (3) 58 1994
Marc E. Lanser, M.D. 49 1994
Ira W. Lieberman, Ph.D. (1) 55 1992
E. Christopher Palmer, CPA (2) (3) 57 1992
____________________
* Includes periods of service as a director of Boston Life Sciences, Inc.
("Old BLSI"), the privately-held company existing prior to the merger (the
"Merger") with Greenwich Pharmaceuticals Incorporated ("Greenwich") in
which Greenwich survived and changed its name to "Boston Life Sciences,
Inc."
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Member of the Press Release Review Committee
The principal occupations and qualifications of each nominee for Director are as
follows:
COLIN B. BIER, PH.D. Dr. Bier has been a member of the Board since February
1996. Since 1990, Dr. Bier has been the Managing and Scientific Director of ABA
BioResearch, Inc., an independent bioregulatory consulting firm, located in
Montreal, Canada, providing expertise for technology assessment, strategic
management and regulatory development of biopharmaceuticals. Dr. Bier is a
special advisor to the Mount Sinai Hospital in Montreal, Lecturer in Pathology,
Faculty of Medicine, McGill University and an Associate in the Department of
Internal Medicine, Montreal General Hospital. Dr. Bier is also a member of the
Board of Directors of Sparta Pharmaceuticals, Inc., Maxim Pharmaceuticals, Inc.,
Receptagen Inc., Nymex Corporation, Credifinance Securities Corp. and InterUnion
Financial Corp. Dr. Bier is also a member of the Board of Directors and on the
Scientific Advisory Boards of several private companies. Prior to his
association with ABA BioResearch, Inc., Dr. Bier was founder, President and
Chief Executive Officer of ITR Laboratories, Inc. Before founding ITR
Laboratories, Inc., Dr. Bier spent over ten years with Bio-Research
Laboratories, Ltd., a contract research laboratory where he was Vice President
and Director of Experimental Toxicology and Clinical Pathology. Dr. Bier has
published more than twenty-five scientific articles in his field in peer-
reviewed journals and received his Ph.D. from Colorado State University.
EDSON D. DE CASTRO Mr. de Castro has been a member of the Board since June
1995, and served as Chairman of the Board until September 1996. Prior to the
Merger, Mr. de Castro held the same positions with Old BLSI from August 1993.
Mr. de Castro was one of five founders of Data General Corporation ("DGC") and
was responsible for the designs of the original NOVA computers. He served as
DGC's President and Chief Executive Officer until 1989 and as its Chairman of
the Board of Directors from 1989 to 1990. Mr. de Castro is Chairman of the
Board of Directors of, and, until January 1997, was Chief Executive Officer of
Xenometrix, Inc., a biotechnology testing company in Boulder, Colorado. Mr. de
Castro is also a member of the Board of Directors of UOL Publishing Inc. and
AVAX Technologies Inc. He is a Trustee of Boston University. Mr. de Castro
received his B.S. in Electrical Engineering from the University of Lowell, MA.
ADRIAN M. GERBER Adrian M. Gerber joined the Company on May 1, 1998 as
Executive Vice President, Business Development and Corporate Planning. Mr.
Gerber is also a member of the Board of Directors of IOTEK, Inc. Mr. Gerber has
spent over thirty years in the pharmaceutical industry, most recently as
Executive Vice President, Business Development and Licensing at Fuisz
Technologies Ltd. from February 1996 through December 1997. He joined Fuisz from
Adrian Gerber, Inc., a pharmaceutical business development company which he
founded in October 1995. From May 1990 through September 1995, Mr. Gerber served
as Executive Vice President, Business Development and Executive Vice President,
Commercial Development at ALZA Corporation. He had joined ALZA from Merck & Co.,
Inc., where, during a 23 year career, he was head of Corporate Licensing, with
previous responsibilities in sales,
6
marketing and strategic planning. Mr. Gerber holds a degree in pharmacy from the
Natal School of Pharmacy in Durban, South Africa.
S. DAVID HILLSON, ESQ. Mr. Hillson has been President, Chief Executive Officer
and a member of the Board since November, 1994 (prior to the merger). He has
also served as Chairman of the Board since September 1996. From January to
November 1994, Mr. Hillson was Senior Vice President of Josephthal, Inc. in the
and investment banking and research divisions and from October 1992 to January
1994, Mr. Hillson was the Senior Managing Director, investment banking, at The
Stamford Company in New York City. From October 1990 until October 1992, Mr.
Hillson was an Executive Vice President of the asset management division of
Mabon Securities. Earlier in his career as an investment manager, Mr. Hillson
was a Senior Vice President with Shearson, Lehman, Hutton from 1983 to 1990
where he managed three mutual funds, primarily in the emerging growth and
venture capital area, for the SLH Asset Management division. Prior to these
responsibilities, he was Chairman of the Equity Committee for Hutton Investment
Management (1976-1982). He began his business career as an attorney in New York
City, having received his Juris Doctorate from New York University School of
Law. He also attended the Columbia University School of Business Administration
and received a Bachelor of Arts degree from Columbia College.
MARC E. LANSER, M.D. Dr. Lanser has been Executive Vice President, Chief
Scientific Officer and a member of the Board since June 1995. Prior to the
Merger, Dr. Lanser held the same position with Old BLSI from November 1994.
From October 1992 until November 1994, Dr. Lanser was President and Chief
Executive Officer of Old BLSI. Prior to assuming the position of President and
Chief Executive Officer of Old BLSI, Dr. Lanser was an Assistant Professor of
Surgery at Harvard Medical School and member of the full-time academic faculty,
where he directed a NIH funded research project in immunology and received a NIH
Research Career Development Award. Dr. Lanser has published more than 30
scientific articles in his field in peer-reviewed journals. Dr. Lanser received
his M.D. from Albany Medical College.
IRA W. LIEBERMAN, PH.D. Dr. Lieberman has been a member of the Board since the
inception of Old BLSI in 1992. Dr. Lieberman is currently on the staff of the
World Bank where he is currently involved in corporate restructuring in East
Asian countries in crisis. From 1987 to 1992, Dr. Lieberman was President of
LIPAM International, Inc. an international consulting and investment firm. From
1985 to 1985, he was on the staff of the World Bank and form 1975 to 1982, he
was a senior executive with ICC Industries, Inc. where he served as Chief
Financial Officer, Executive Vice President and President of Promex Plastics,
Inc. one of ICC's subsidiary companies. He also served on the Board of
Director of various ICC subsidiaries and affiliates. Dr. Lieberman received his
B.A. from Lehigh University, an M.B.A. from Columbia University and a Ph.D.
(D. Phil,) from Oxford University.
E. CHRISTOPHER PALMER, CPA Mr. Palmer has been a member of the Board since the
inception of Old BLSI in 1992. Mr. Palmer is a certified public accountant and
founder of his own firm, providing tax and financial advisory services to high
net-worth family groups. Prior to 1977, Mr. Palmer was a partner in the
accounting firm of Peat Marwick Mitchell & Co. Mr. Palmer is a Director of
Boston Private Bancorp, Inc. and a director and Chairman of the Trust and
Investment Committee of Boston Private Bank & Trust Company, a Director of
Coastal International Inc. and a trustee of two private foundations. Mr. Palmer
received his M.B.A. from Rutgers University and his A.B. from Dartmouth College.
7
Meetings and Committees of the Board of Directors
- -------------------------------------------------
The Board held eight meetings during the Company's fiscal year. Each of the
Company's directors attended at least 75% of the aggregate of all meetings of
the Board and of all committees on which he was a member held during the year.
The standing committees of the Board are the Audit Committee, the Compensation
Committee and the Press Release Review Committee. The Company does not have an
executive committee or a nominating committee. The Audit Committee, consisting
of Messrs. de Castro and Palmer, met two times during the last fiscal year. The
Audit Committee reviews the results and scope of audits, internal accounting
controls, tax and other accounting related matters and reviews with the
Company's independent auditors the scope and results of their engagement. The
Compensation Committee, consisting of Messrs. Kanzer and Lieberman and Bier,
met one time during the last fiscal year. The Compensation Committee reviews and
evaluates the compensation of the Company's executive officers and administers
the Company's stock option plans. The Press Release Review Committee, consisting
of Messrs. Hillson and Palmer and Dr. Bier, reviewed six press releases during
the last fiscal year. The Press Release Review Committee assists in the review
and approval of press releases from the Company involving the testing of new
drugs, or the FDA new drug review and approval process for investigational new
drugs being developed by the Company.
Compensation of Directors
- -------------------------
Annual Retainers
------------------
Directors who are not employees of the Company ("Non-Employee Directors"),
receive cash compensation in the amount of $500 per meeting attended in person
and $250 per meeting attended telephonically, although all directors are
reimbursed for ordinary and reasonable expenses of attending any board or
committee meetings. In addition, Non-Employee Directors were compensated in
fiscal 1997 with an annual retainer with a value of $5,000 and will receive the
same amount in fiscal 1998. Currently, the annual retainer is not paid in cash
but is paid to the Non-Employee Directors through options to purchase shares of
the Company's Common Stock pursuant to the Amended and Restated 1990 Non-
Employee Directors' Non-Qualified Stock Option Plan (the "Directors' Plan") (the
Board has approved the second amendment and restatement of the Directors' Plan
and it is being submitted for stockholder approval pursuant to this Proxy
Statement), valued as described below. Each Non-Employee Director elected at an
annual meeting of stockholders of the Company will automatically be granted
options on the thirteenth trading day after the date of such annual meeting (the
"Retainer Grant Date") to purchase a number of shares of the Company equal to
the lesser of (a) 2,500 shares and (b) the quotient of the value of the annual
retainer for service as an Non-Employee Director of the Company and 80% of the
average of the fair market value of a share of the Company's Common Stock on the
ten trading days following the third trading day after the date of such annual
meeting of stockholders. If the number of shares of the Company's Common Stock
calculated pursuant to clause (b) above exceeds 2,500 shares, each Non-Employee
Director will automatically receive on the Retainer Grant Date, in addition to
options to purchase 2,500 shares of the Company's common stock, a cash payment
equal to the remaining portion of the value of the annual retainer not provided
for by the grant of such options. Additionally, pursuant to the Directors'
Plan, each Non-Employee Director received in fiscal 1997 a discretionary grant
of options to purchase 10,000 shares of the Company's Common Stock.
Each director who serves as Chairman of a committee of the Board receives
an annual retainer of $1,000. The Chairmen of the Audit Committee and the
Compensation Committee who received this annual retainer in fiscal 1997 were Mr.
Palmer, and Dr. Lieberman, respectively. There was not a Chairman of the Press
Release Review Committee during 1997.
8
Exercise and Vesting
--------------------
The options granted to the Non-Employee Directors pursuant to the annual
retainer are exercisable at a per share price of 20% of the average fair market
value per share (as described above) of the Company's Common Stock used to
calculate such grant. Subject to provisions regarding expiration and
termination of options, the options become exercisable as to 75% of the shares
of Common Stock of the Company issuable upon exercise of such options six months
after the date of grant and as to 100% of such shares, on the later of six
months after the date of grant and December 31 of the year in which the grant is
made.
The options granted to the Non-Employee Directors pursuant to the
discretionary grant in 1997 are exercisable as follows: 25% exercisable as of
July 22, 1997; 50% exercisable as of July 22, 1998; 75% exercisable as of July
22, 1999; 100% exercisable as of July 22, 2000. Notwithstanding the foregoing
vesting schedule, all of the above-described options shall become vested and
exercisable immediately upon the receipt by the Company of marketing approval
granted by the FDA for any of its products.
New Director Options
--------------------
Each person who is elected or appointed a Non-Employee Director for the
first time automatically upon such election or appointment (the "Automatic Grant
Date") will be granted an option to purchase 7,500 shares of the Company's
Common Stock ("New Director Options"). The exercise price of any New Director
Options granted under the Directors' Plan may not be less than 100% of the fair
market value of shares of the Company's Common Stock subject thereto on the
Automatic Grant Date. Subject to provisions regarding expiration and termination
of options, any New Director Options become exercisable as to 20% of the shares
of the Company's Common Stock subject thereto on the Automatic Grant Date and
become exercisable as to an additional 20% of the shares of the Company's Common
Stock issuable upon exercise thereof on each of the first, second, third and
fourth anniversaries of such Automatic Grant Date.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOMINEES PRESENTED.
9
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by the
Company for the year ended December 31, 1997 for services rendered in all
capacities to each of the most highly compensated executive officers whose total
annual salary and bonus for that period exceeded $100,000 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
-------------------------------------------- ------
COMMON
STOCK
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY(2) BONUS(2) OPTIONS COMPENSATION(3)
-------------------- -------- -------------- -------------- ------------- ---------------
S. David Hillson............................. 1997 $195,000 $72,500(4) 150,000 $5,564
Chairman of the Board, President 1996 170,000 200,000(5) 25,000 None
And Chief Executive Officer 1995 170,000 150,000 93,230 None
Marc E. Lanser, M.D.......................... 1997 $180,000 $17,500 100,000 $13,391
Executive Vice President 1996 166,000 50,000 25,000 13,349
And Chief Scientific Officer 1995 158,208 35,000 78,070 10,366
Joseph Hernon................................ 1997 $90,000 $14,000 46,000 $4,113
Chief Financial Officer 1996 36,750(6) 10,000 24,000 None
________
(1) Includes compensation only for the period of the applicable year during
which the individual was employed by the Company.
(2) Amounts shown represent cash compensation earned by the Named Executive
Officers in the fiscal years presented even if paid in subsequent years.
(3) All other compensation for Mr. Hillson for 1997 includes the dollar value of
premiums paid by the Company with respect to life insurance and disability
insurance for the benefit of Mr. Hillson in the amount of $5,564. All other
compensation for Dr. Lanser includes the following amounts for fiscal 1997,
1996, and 1995, respectively: the dollar value of matching contributions
under the Company's 401(k) plan, in the amount of $0, $4,500, and $2,449,
respectively; the dollar value of premiums paid by the Company with respect
to life insurance and disability insurance for the benefit of Dr. Lanser in
the amount of $11,291, $6,749, and $7,917, respectively; and the dollar
value attributable to parking reimbursement in excess of the limits
permitted under the Internal Revenue Code of $2,100, $2,100, and $0,
respectively. All other compensation for Mr. Hernon for 1997 includes the
dollar value of premiums paid by the Company with respect to life insurance
and disability insurance for the benefit of Mr. Hernon in the amount of
$813, and the dollar value of matching contributions under the Company's
401(k) plan in the amount of $3,300.
(4) Mr. Hillson's employment agreement expired November 14, 1997. In connection
with the renewal of his employment agreement through December 31, 1998, Mr.
Hillson received a contract renewal payment of $50,000. Mr. Hillson was
awarded a bonus of $22,500 for the year ended December 31, 1997.
(5) Mr. Hillson received a non-discretionary bonus from the Company based upon
the Board's determination that he had met certain performance targets
specified in his agreement of employment, dated November 7, 1994, which by
its terms expires in December 1998.
(6) Mr. Hernon joined the Company in August 1996.
10
STOCK OPTION INFORMATION
The following table sets forth, for each of the Named Executive Officers,
certain information concerning the grant of options to such persons in fiscal
1997.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (3)
------------------------------------------------------------- -----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR ($/SH)(2) DATE 5% 10%
---- ------------- ----------- --------- ----- ---- ----
S. David Hillson, Esq................ 150,000 42.33% $4.47 7/22/07 $421,674 $1,068,604
Marc E. Lanser....................... 100,000 28.22% $4.47 7/22/07 281,116 712,403
Joseph Hernon....................... 46,000 12.98% $4.47 7/22/07 129,313 327,405
__________
(1) All options granted to Mr. Hillson and Dr. Lanser, and 20,000 of the options
granted to Mr. Hernon are exercisable as follows: 25% exercisable as of July
22, 1997; 50% exercisable as of July 22, 1998; 75% exercisable as of July
22, 1999; and 100% exercisable as of July 22, 2000. Notwithstanding the
foregoing vesting schedule, all of the above-described options shall become
vested and exercisable immediately upon the receipt by the Company of
marketing approval granted by the FDA for any of its products. The remaining
26,000 options issued to Mr. Hernon are exercisable as follows: 33%
exercisable as of July 22; 1997, 67% exercisable as of July 22, 1998; and
100% exercisable as of July 22, 1999.
(2) The exercise price for each option is equal to the fair market value of the
Company's Common Stock on the date of grant.
(3) Potential realizable value is based on the assumed annual growth rates
listed, compounded annually for the ten-year option term. The dollar amounts
set forth under this heading are the results of calculations at the 5% and
10% assumed rates established by the SEC and are not intended to forecast
possible future appreciation, if any, of the value of the Common Stock.
None of the Named Executive Officers exercised any options in fiscal 1997.
11
The following table sets forth, for each of the Named Executive Officers,
certain information concerning the value of unexercised options at December 31,
1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
Number of Securities
Underlying
Unexercised Value of Unexercised In-
Shares Options at Fiscal the-Money Options at
Acquired on Value Year-End(#) Fiscal Year-End ($)(1)
------------------------- -------------------------
Name Exercise (#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- ---------- ------------------------- -------------------------
S. David Hillson, Esq............... None None 329,802/120,833 $266,174/$0
Marc E. Lanser...................... None None 127,337/83,333 $11,090/$0
Joseph Hernon....................... None None 22,667/47,333 $0/$0
________
(1) The fair market value of "in-the-money" options was calculated on the basis
of the difference between the exercise price of the options held and the
closing price per share for Common Stock on the Nasdaq SmallCap Market of
$2.28125 on December 31, 1997, multiplied by the number of options held.
EMPLOYMENT CONTRACTS
S. David Hillson, Esq. and Marc E. Lanser, M.D. have entered into
employment agreements (individually an "Employment Agreement" and, collectively,
the "Employment Agreements") with the Company. Pursuant to the terms of Mr.
Hillson's original Employment Agreement dated November 7, 1994, which includes
confidentiality and non-competition provisions, Mr. Hillson was employed as
President and Chief Executive Officer of the Company and was entitled to an
annual base salary of at least $170,000, plus other incidental benefits, plus
additional cash payments should certain events occur. Mr. Hillson's Employment
Agreement was amended as of January 1, 1997 to extend the term thereof to
December 31, 1998 and to increase his annual base salary to $195,000. Upon
signing the amendment, Mr. Hillson received a renewal payment of $50,000.
Pursuant to the terms of Dr. Lanser's Employment Agreement dated July 7, 1993,
as amended, which includes confidentiality and non-competition provisions, Dr.
Lanser is employed as Executive Vice President and Chief Scientific Officer of
the Company and is entitled to receive an annual salary of at least $150,000,
plus other incidental benefits.
12
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Overview
- --------
The Boston Life Sciences, Inc. compensation program for its executive
officers consists of four parts: base salary, annual bonus, stock options, and
additional benefits. In maintaining this program, the Company's overall
recruitment and compensation philosophy is a very important consideration. This
philosophy is to hire individuals possessing excellent professional skills,
coupled with demonstrated track records, who can be expected to help achieve the
Company's goal of moving from a development-stage company to a broad-based,
diversified product, revenue-generating biotechnology company.
The Company has a continued commitment to recruit, motivate and retain
executive officers with demonstrated talent and leadership skills, typically
gained from successful experiences in positions of meaningful responsibility in
other industry settings. This approach should enable the Company to acquire the
requisite management leadership to fulfill its stated mission.
An inherent part of this philosophy is the leveraging of the compensation
program by placing a major emphasis on equity participation. This is
accomplished by offering a significant capital accumulation opportunity to key
managers, which also conserves the Company's cash and blends the interests of
stockholders with those of management. The Company's target from a personnel
perspective is for total compensation to be competitive with that for other
biotechnology companies.
Performance Criteria - General
- ------------------------------
Because the Company is still in the process of developing its proprietary
products and because of the highly volatile nature of the stock price in
biotechnology companies in general, the use of traditional corporate performance
standards, such as sales, profit levels and stock performance, to measure the
success of the Company and an individual's role in contributing to that success,
is not appropriate.
Accordingly, the compensation of executive officers is based, for the most
part, on realistically timely achievement of certain product research and
development goals by the Company and the positive contribution by the
individuals concerned. The Committee will evaluate the Company's progress and
performance using criteria such as the extent to which key research, clinical,
product manufacturing, product sales and financial objectives of the Company
have been met during the preceding fiscal year, including the achievement by the
Company of certain milestones, whether specified in agreements with third party
collaborators or determined internally. In addition, the Committee may take
into account the Company's success in the development, acquisition and licensing
of key technologies. The Committee will also evaluate the individual executive
officer's performance, using criteria such as the executive officer's
involvement in and responsibility for the development and implementation of
strategic planning and the attainment of strategic objectives of the Company
including beneficial supervision of other management. An executive officer's
contribution in this regard may also involve both the participation by the
executive officer in the relationship between the Company and the investment
community as well as the contribution by the executive officer to the ongoing
scientific development activities of the Company. In evaluating each facet of
performance and compensation, the Committee is likely to consider the necessity
of being competitive with other companies in the biotechnology industry, taking
into account relative company size, stage of development and geographic
location.
13
Base Salary
- -----------
Company philosophy regarding base salary is to maintain it at a competitive
level, sufficient to recruit and retain individuals possessing the skills and
experience necessary to achieve the Company's vision and mission over the long
term. Determinations of appropriate base salary levels will generally be made
with the input of various industry and industry-related surveys and special
studies, such as the 1995 Leadership and Biotechnology Survey published jointly
by J. Robert Scott and Price Waterhouse LLP, as well as by monitoring
developments in the biotechnology industry. This information is also used in
evaluating other compensation elements. Periodic adjustments in base salary will
often relate to competitive factors and to individual performance evaluated
against criteria such as those noted above. Other benefits are maintained at
what the Committee believes is an industry-competitive level.
Annual Bonus
- ------------
The Compensation Committee of the Board, in its discretion, may award
bonuses to executive officers, and the Company expects to pay such bonuses based
on the evaluation of the performance of each executive officer for the year as a
whole. The Company is also required under certain circumstances under the
Employment Agreements with Mr. Hillson and Dr. Lanser to pay certain bonuses.
The intent of the annual bonus is to motivate and reward high level performance
of executive officers as measured against distinct and clearly articulated goals
and in light of the competitive compensation practices of the whole
biotechnology industry. The exact goals vary with each executive officer's
responsibilities rather than being fixed by reference to overall measures of the
Company's performance. Annual bonus awards are determined by the Compensation
Committee of the Board with assistance from senior management.
Executive officers who received a non-contractually based bonus in fiscal
1997 were S. David Hillson, Chairman, President & Chief Executive Officer, of
the Company, Marc E. Lanser, Executive Vice President and Chief Scientific
Officer of the Company and Joseph Hernon, Chief Financial Officer of the
Company. Factors that were considered in setting levels for bonus and option
grants for the Chief Scientific Officer in fiscal 1997 included, without
limitation, desirable acquisition of new technologies on advantageous terms,
development of sound clinical trial protocols, reasonable control over
scientific budgets, participation in investor relation programs and cooperative
involvement with money-raising efforts.
Stock Options
- -------------
Stock options are viewed as a fundamental element in the total compensation
program and, in keeping with the Company's basic philosophy, emphasize long-term
Company performance, as measured by creation and enhancement of stockholder
value. Additionally, stock options foster a community of interest between
stockholders and participants. The Company believes that because of this
community of interest, the use of stock options is preferable to other forms of
stock compensation such as restricted stock. Options under the plans are
granted to all executive officers as incentive to contribute significantly to
the growth and successful operation of the Company. The specific determination
of the number of options to be granted, however, is not based upon any specific
criteria.
Although options may be granted at any price equal to or greater than 50%
of fair market value of the Common Stock, generally options have been granted to
executive officers, as a matter of Company policy, at 100% of the fair market
value on the date of grant. The Company has generally awarded options to
executive officers on employment and at regular intervals thereafter, but awards
may be made at other times as well.
Vesting of stock options is determined by the Compensation Committee. To
date, options granted to executive officers fully vest within four years after
the date of grant.
14
Qualifying Executive Compensation for Deductibility Under Applicable Provisions
- -------------------------------------------------------------------------------
of the Internal Revenue Code
- ----------------------------
Section 162(m) of the Internal Revenue Code, adopted in 1993, provides that
a publicly held corporation generally may not deduct compensation for its chief
executive officer or for each of certain other executive officers to the extent
that such compensation exceeds $1,000,000 for the executive or does not qualify
as a "performance based" compensation arrangement. The Committee intends to take
such actions as may be appropriate to qualify compensation received by such
executives upon exercise of options granted under the Company's stock option
plans for deductibility under Section 162(m). The Committee notes that base
salary and bonus levels are expected to remain well below the $1,000,000
limitation in the foreseeable future.
Chief Executive Officer Compensation
- ------------------------------------
In fiscal 1997, pursuant to the terms of his original Employment Agreement
dated November 7, 1994, Mr. Hillson received an annual base salary of $195,000,
a discretionary bonus of $22,500, plus other incidental benefits. In addition,
in connection with the renewal of his employment agreement through December 31,
1998, Mr. Hillson received a contract renewal payment of $50,000.
COMPENSATION COMMITTEE
STEVE H. KANZER, CPA, ESQ.
IRA W. LIEBERMAN, PH.D.
COLIN B. BIER, PH.D.
This report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended (the
"Securities Act") or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under the Securities Act and the Exchange Act and
shall not be deemed soliciting material.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
The Compensation Committee of the Company's Board during the last completed
fiscal year was composed of Steve Kanzer, Ira Lieberman, and Colin Bier. Mr.
Kanzer was also the Secretary of the Company during the last fiscal year.
Boston Private Bank & Trust Company (the "Bank") is the Company's primary
banking institution. E. Christopher Palmer, CPA, a director of the Company, is
a Director and Chairman of the Trust and Investment Committee of the Bank and a
director of Boston Private Bancorp, Inc., which is an affiliate of the Bank.
Fees paid to the Bank during fiscal 1997, primarily for investment management
advisory services, totalled approximately $45,000.
15
Performance Graph
- -----------------
The following graph compares the yearly percentage change in cumulative
total stockholder return on the Common Stock from 1992 to the present with the
cumulative total return on the Nasdaq Total Return Index and the Nasdaq
Pharmaceutical Stock Index over the same period. The Company is the surviving
entity of the Merger between Old BLSI and Greenwich, which was effective as of
June 15, 1995. This Stock Performance Graph therefore reflects the performance
of the Company's stock as Greenwich stock prior to the Merger, as well as the
Company's stock after the Merger. The comparison assumes $100 was invested on
January 1, 1992 in the Common Stock and in each of the indices and assumes
reinvestment of dividends, if any, since that date. The Company has not paid
cash dividends on the Common Stock. Historic stock price is not indicative of
future stock price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
- ---------------------------- FISCAL YEAR ENDING -------------------------------
COMPANY 1992 1993 1994 1995 1996 1997
BOSTON LIFE SCIENCES INC 100 40.74 1.39 11.11 10.19 3.38
PEER GROUP 100 89.13 67.08 122.72 119.41 127.18
BROAD MARKET 100 119.95 125.94 163.35 202.99 248.30
THE PEER GROUP CHOSEN WAS:
NASDAQ PHARMACEUTICAL INDEX
THE BROAD MARKET INDEX CHOSEN WAS:
NASDAQ MARKET INDEX
This Stock Performance Graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this proxy statement into
any filing under the Securities Act or under the Exchange Act, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under the Securities Act and the
Exchange Act and shall not be deemed soliciting material.
16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Company's January and February 1996 equity
offerings, the Company paid a fee to Paramount Capital, Inc. ("Paramount"), as
the placement agent involved with such offerings, consisting of 23.991 units
(each unit consisting of 1,000 shares of Series A Convertible Preferred Stock
and warrants to purchase 2,500 shares of Common Stock). Lindsay A. Rosenwald,
M.D., the Chairman of the Board of Directors, Chief Executive Officer and sole
stockholder of Paramount, is currently a holder of more than 5% of the
outstanding Common Stock of the Company. Additionally, the Company executed an
agreement which provided that, effective February 1996, Paramount received a
retainer fee of $2,500 per month for twenty four months and an as yet to be
agreed-upon success fee with respect to corporate partners first introduced to
the Company by Paramount.
In August 1995, the Company entered into a two-year financial advisory
services agreement with Paramount. In connection therewith, the Company issued
warrants to Paramount for the purchase of 25,000 shares of the Company's Common
Stock, which were 50% exercisable at the time of issuance and 100% exercisable
in August 1996.
Boston Private Bank & Trust Company (the "Bank") is the Company's primary
banking institution. E. Christopher Palmer, CPA, a director of the Company, is a
Director and Chairman of the Trust and Investment Committee of the Bank and a
director of Boston Private Bancorp, Inc., which is an affiliate of the Bank.
Fees paid to the Bank during fiscal 1997, primarily for investment management
advisory services, totalled approximately $45,000.
In April 1997, the Bank loaned $150,000 to Dr. Lanser, the Company's
Executive Vice President and Chief Scientific Officer (the "Loan"). The Loan
bears interest at prime and matures in its entirety on September 30, 1998. As a
condition to and as security for the Loan, the Bank requested that the Company
pledge to the Bank a certificate of deposit in the amount of $155,000 (the
"Company Pledge"). In recognition of Dr. Lanser's past and expected future
contributions to the Company and as an additional motivation and incentive to
Dr. Lanser, which the Company's Board of Directors determined would reasonably
benefit the Company, the Company agreed to provide the Company Pledge. As
security for the Company, however, in the event Dr. Lanser defaults on the Loan
and the Bank forecloses on the Company Pledge, Dr. Lanser has executed and
delivered to the Company his contingent note in the amount of $150,000, bearing
interest identical to the Loan (the "Contingent Note") and a perfected pledge of
50,000 shares of Common Stock of the Company which he beneficially owns. The
Company will demand payment of the Contingent Note only in the event that the
Bank forecloses on the Company Pledge as a result of Dr. Lanser's defaulting on
his payment of the Loan.
17
PROPOSAL NO. 2 APPROVAL OF 1998 OMNIBUS PLAN
At the Company's Annual Meeting, stockholders of the Company will be asked
to approve the Company's 1998 Omnibus Stock Option Plan (the "1998 Omnibus
Plan"), which, if approved, will become effective immediately thereafter.
Approval of the 1998 Omnibus Plan by the stockholders of the Company is required
in order for it to comply with Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). The 1998 Omnibus Plan will be identical in all
material respects to the current Amended and Restated Omnibus Stock Option Plan
(the "Old Omnibus Plan"), which shall remain in place.
The proposal to approve the 1998 Omnibus Plan will become effective if it
receives the affirmative vote of the majority of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote on the adoption
of the 1998 Omnibus Plan. In order for stock options granted under the 1998
Omnibus Plan to qualify as "ISOs" within the meaning of Section 422 of the Code,
the 1998 Omnibus Plan must be approved by the Company's stockholders within one
year of April 23, 1998, the date as of which the 1998 Omnibus Plan was approved
by the Board. In the event the 1998 Omnibus Plan is not approved by
stockholders, the 1998 Omnibus Plan will not become effective.
As of April 21, 1998, the closing price of the Company's common stock on
the Nasdaq SmallCap Market was $2 5/32.
Set forth below is a summary of the 1998 Omnibus Plan, which is qualified
in its entirety by the terms of such plan. The 1998 Omnibus Plan is set forth
in full as Appendix A to this Proxy Statement and is incorporated herein by
reference.
Description of 1998 Omnibus Plan
The purpose of the 1998 Omnibus Plan is to assist the Company in attracting
and retaining employees, advisors and consultants of outstanding ability, and to
foster a community of interest of such employees, advisors, and consultants with
those of the Company's stockholders.
The 1998 Omnibus Plan, upon becoming effective, will be administered by the
Compensation Committee of the Board of Directors of the Company. The total
number of options to be granted in any year under the 1998 Omnibus Plan, the
number and selection of persons to receive options, the number of options
granted to each and the other terms and provisions of such options are wholly
within the discretion of the Compensation Committee, subject to the limitations
set forth in the plan. Under the terms of the 1998 Omnibus Plan, "incentive
stock options" ("ISOs") within the meaning of Section 422 of the Code and "non-
qualified stock options" ("NSOs") may be granted by the Compensation Committee
to selected employees, directors, consultants, independent contractors and
members of the Scientific Advisory Board, except that ISOs may be granted only
to persons who are employees of the Company or any of its subsidiaries at the
time the ISOs are granted. The 1998 Omnibus Plan contains no limitation upon
the number of shares which may be issued upon exercise of options, whether ISOs
or NSOs, that may be granted to an individual employee, consultant, independent
contractor or member of the Scientific Advisory Board over the term of such
plan; provided, however, that the aggregate fair market value (as of the date of
grant) of shares of Company Common Stock subject to ISOs under the 1998 Omnibus
Plan and all other plans of the Company which become exercisable for the first
time by any optionee during any calendar year shall not exceed $100,000.
18
Option Grants and Exercise
Under the 1998 Omnibus Plan, up to an aggregate of 500,000 shares of
Company Common Stock may be issued under the Plan (subject to adjustments in the
event of stock dividends, stock splits, reverse stock splits, combinations,
reclassifications or like changes in the capital structure of the Company) may
be granted to employees, consultants, directors, independent contractors and
members of the Scientific Advisory Board of the Company or any of its
subsidiaries. Under the terms of the 1998 Omnibus Plan, the exercise price of
an ISO may not be less than 100% of the fair market value of shares of Company
Common Stock subject thereto on the date of grant, except that, in the case of
an ISO granted to an individual who, at the time such ISO is granted, owns
shares of capital stock of the Company possessing more than ten percent of the
total combined voting power of all classes of stock of the Company (a "Ten-
Percent Stockholder"), such exercise price may not be less than 110% of such
fair market value. The exercise price of an NSO may not be less than 50% of the
fair market value of a share of Company Common Stock on the date of grant, but
in no event shall the exercise price be less than par value.
The exercise price of options granted under the 1998 Omnibus Plan may be
paid in cash or, at the discretion of the Compensation Committee, in shares of
Company Common Stock previously owned by the optionee with a value equal to the
total option exercise price, or in any combination thereof. Not less than ten
shares may be purchased at any time upon the exercise of an option unless the
number of shares so purchased constitutes the total number of shares issuable
upon exercise of the option. During the lifetime of an optionee, an option may
be exercised only by the optionee or such optionee's guardian or legal
representative. Generally, an option may not be transferred or assigned, except
by will or the laws of descent and distribution.
Under the 1998 Omnibus Plan, the option exercise price also may be paid,
under certain circumstances at the discretion of the Compensation Committee, in
shares of Company Common Stock issuable upon exercise of options then
exercisable by the optionee having a fair market value equal to the option
exercise price on the date of exercise. This provision permits an optionee not
only to use then-held shares of stock in a single exercise of stock options, but
also to use the stock received upon the exercise of stock options to exercise
additional stock options in a process known as "pyramiding." Such pyramiding
permits an optionee to effect a cashless exercise of all or a portion of his
options then exercisable (no matter what the number) without surrendering any
shares of stock or making any additional cash investment. An optionee who
exercises options by pyramiding will own, after the exercise, a number of
additional shares equal in value to the spread between the fair market value of
a share of Company Common Stock on the date of exercise and the option exercise
price multiplied by the number of options exercised.
Each ISO will be exercisable over a period, determined by the Compensation
Committee in its discretion, not to exceed ten years from the date of grant,
except that in the case of an ISO granted to a Ten-Percent Stockholder, the
exercise period for an ISO may not exceed five years from the date of grant, as
required by the Code. In the case of an NSO, the exercise period shall not
exceed ten years from the date of grant. Subject to the terms of the 1998
Omnibus Plan, stock options may be exercisable during the exercise period at
such times, in such amount, in accordance with such terms and conditions of, and
subject to such restrictions as are set forth in, the option agreement
evidencing the grant of such stock options. The Compensation Committee may, in
its discretion, accelerate the exercisability of any options granted under the
1998 Omnibus Plan which would otherwise be unexercisable.
Adjustments
In the event that the Compensation Committee determines that any dividend
or other distribution (whether in the form of cash, shares of Company Common
Stock, or other property), recapitalization, stock split, reverse split,
reorganization, merger, consolidated, spin-off, combination, repurchase, or
share exchange, or other similar corporate transaction or event, affects the
Company Common Stock such that an adjustment is appropriate in order to prevent
dilution or enlargement of the rights of optionees under the 1998 Omnibus Plan,
then the Compensation Committee shall make such equitable changes or adjustments
as it deems necessary or appropriate to any or all of (i) the number and kind of
shares of Company Common Stock which may thereafter be issued in connection with
options, (ii) the number and kind of shares of Company Common Stock issued or
issuable in respect of outstanding options, and (iii) the exercise price
relating to any option; provided that, with respect to ISOs, such adjustment
shall not constitute a "modification" under Section 424(h) of the Code.
19
In addition, in the event that a "Change in Control" occurs while any
option remains outstanding under the 1998 Omnibus Plan, all options granted
under such plan that are outstanding as of the time of such change of control
will become immediately exercisable in full, without regard to the time period
that has elapsed from the date of grant or to the vesting provisions.
Generally, a Change in Control will be deemed to occur upon the earlier of (i)
any person or entity becoming the beneficial owner, directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding voting securities, (ii) a change in the
composition of the Board of Directors of the Company during any period of not
more than two consecutive years such that individuals who constitute the Board
of Directors of the Company at the beginning of such period cease for any reason
to constitute at least a majority of such board, (iii) the approval by the
stockholders of the Company of a merger or consolidation of the Company with any
other company whereby the combined voting power of the Company's securities no
longer represents at least 50% of the combined voting power of the surviving or
parent entity outstanding after such merger (other than the Merger) or
consolidation or (iv) the stockholders of the Company approve a plan of complete
liquidation or an agreement for the sale of all or substantially all of the
assets of the Company.
Termination of Eligibility
If an individual to whom options have been granted under the Plan ceases to
be an employee, consultant, independent contractor or director of the Company as
the result of a termination without cause (other than due to death or
disability), (A) any options held by such person that were exercisable on the
date of such termination may be exercised by the that person for the later of:
i) a period of one year following the date of such termination, or ii) a period
of one year from the date any option vests in the twelve month period following
such termination, and (B) any options held by such person that were not
exercisable on the date of such termination will continue to vest in accordance
with their original vesting schedule for a period of 12 months following the
date of termination, and any options that vest during such 12-month period may
be exercised by that person for a period of one year following the date of such
vesting.
If an individual to whom options have been granted under the Plan ceases to
be an employee, consultant, independent contractor or director of the Company as
the result of a voluntary resignation (other than due to death or disability),
(A) any options held by such person that were exercisable on the date of such
resignation may be exercised by the that person for the later of: i) a period of
one year following the date of such resignation, or ii) a period of one year
from the date any option vests in the twelve month period following such
resignation, and (B) any options held by such person that were not exercisable
on the date of such resignation will continue to vest in accordance with their
original vesting schedule for a period of 12 months following the date of
resignation, and any options that vest during such 12-month period may be
exercised by that person for a period of one year following the date of such
vesting, provided that the individual has been an employee, consultant or
director of the Company for at least three years and has signed a non-compete
agreement with the Company (such agreement to include biotechnology companies,
academic and/or research organizations encompassing biotechnology, and venture
capital companies in the biotechnology sector).
If any recipient of an option under the 1998 Omnibus Plan dies within the
one year period following termination of employment or other relationship, such
optionee's Beneficiary may exercise such optionee's options, to the extent
exercisable or vested at the time of death, for a period not to exceed one year
after such date, but in no event later than expiration of the such option's
term. If any recipient of an option ceases employment or other relationship
with the Company and its subsidiaries due to death or disability, such
optionee's options (whether or not otherwise exercisable at the time of such
optionee's termination of employment or other relationship due to death or
disability) shall be come fully exercisable by such optionee, or by the
Beneficiary, for a period not to exceed one year after the optionee's death or
termination of employment or other relationship due to death or disability, but
in no event later than the expiration date of such option. Shares of Company
Common Stock issuable upon exercise of options granted under the 1998 Omnibus
Plan that have expired or been surrendered or terminated will be returned to the
plan and become available for issuance upon exercise of future options granted
under the plan.
20
Termination of Plan
The 1998 Omnibus Plan will terminate by its terms on April 23, 2008, except
with respect to options outstanding on such date. The Company's Board of
Directors may sooner terminate or amend the 1998 Omnibus Plan at any time,
subject to its terms; provided, that the Board may seek stockholder approval of
an amendment if determined to be required by or advisable under regulations of
the Securities and Exchange Commission or the Internal Revenue Service, the
rules of any stock exchange or system on which Company Common Stock is listed or
other applicable law or regulation.
Summary of Federal Income Tax Consequences of the 1998 Omnibus Plan
The following summary is intended only as a general summary of the United
States Federal income tax consequences under current law with respect to
participation in the 1998 Omnibus Plan, and does not attempt to describe all
possible Federal or other tax consequences of such participation. Furthermore,
the tax consequences of options are complex and subject to change, and a
taxpayer's particular situation may be such that some variation of the described
rules is applicable.
ISOs. ISOs granted under the 1998 Omnibus Plan are each intended to
----
qualify for taxation as an "incentive stock option" within the meaning of
Section 422 of the Code.
GRANT -- Upon the grant of an ISO, the optionee will not recognize any
income and the Company will not be entitled to a deduction with respect to such
grant.
EXERCISE -- Upon the timely exercise of an ISO, the optionee will not
recognize any income and the Company will not be entitled to a deduction with
respect to such exercise. (The timely exercise of an ISO may, however, affect
the optionee's liability under the alternative minimum tax.) The exercise of an
ISO by an optionee will be timely if made while the optionee is employed by the
Company or within three months after the cessation of such employment. If the
exercise of an ISO is not timely, the ISO will be taxed according to the rules
for NSOs. An optionee's aggregate basis for shares acquired upon exercise of an
ISO will be equal to the exercise price paid for such shares. The holding
period for the shares will begin on the day following the date of exercise and,
accordingly, will not include the period during which the ISO was held.
SALE -- If an optionee makes a disposition of shares acquired pursuant to
an ISO, and such shares were held for more than two years from the date of the
grant of such ISO and one year from the date of exercise of such ISO then any
gain or loss realized upon such disposition will be treated as long-term capital
gain or loss. Under such circumstances, the Company will not be entitled to a
deduction with respect to such disposition.
If, however, the optionee makes a disposition of shares acquired pursuant
to an ISO within either two years from the date of the grant of such ISO or one
year from the date of exercise of such ISO (other than a mere pledge or
hypothecation of the shares or a transfer by reason of death, bequest or
inheritance) ("disqualifying disposition"), then the optionee will generally be
required to recognize (i) as ordinary income, an amount equal to the excess over
the exercise price of the option of the fair market value of the shares on the
exercise date and (ii) as capital gain, an amount equal to the excess, if any,
of the amount realized on the disqualifying disposition over the fair market
value of the shares on the exercise date. However, in the case where the
disqualifying disposition is a sale or exchange, the amount that the optionee
will be required to recognize as ordinary income may not exceed the excess of
the amount realized on such sale or exchange over the exercise price. In the
case of such a disqualifying disposition, the Company will be entitled to a
deduction equal to the amount recognized by the optionee as ordinary income.
Any loss recognized upon a disqualifying disposition will generally be a capital
loss, and will be long-term capital loss if the holding period for the disposed
shares is more than one year.
The option exercise price of options granted under the 1998 Omnibus Plan
may be paid by the transfer to the Company of shares of Company Common Stock
with a fair market value equal to the aggregate exercise price of the option.
If the optionee transfers to the Company shares of Company Common Stock issued
upon exercise of an ISO
21
before both the one and two-year holding periods have expired, the transfer will
be treated as a disqualifying disposition of such shares with the tax
consequences described above. If the shares so transferred were not issued upon
exercise of an ISO or, if they are such shares and both the one and two-year
periods have expired, such transfer to the Company will not be a taxable event.
NSOs. Any other option granted under the 1998 Omnibus Plan will qualify
----
for taxation as a NSO.
GRANT -- Upon the grant of a NSO, an optionee will not recognize any
income tax and the Company will not be entitled to a deduction with respect to
such grant.
EXERCISE -- Except as described below, upon the exercise of a NSO the
optionee will recognize ordinary income in an amount equal to the excess of the
fair market value of the shares acquired over the exercise price. The Company
will be entitled to a deduction corresponding to the amount recognized as
ordinary income by the optionee. If, however, the shares acquired are subject
to a "substantial risk of forfeiture" under Section 83 of the Code, the optionee
will not recognize ordinary income until the lapse of such risk (unless the
optionee makes an election under Section 83(b) of the Code to recognize ordinary
income at the time of exercise).
Under the short-swing profit rules of the Exchange Act, the purchase of
shares upon exercise of a NSO by an "insider" (e.g. an officer or director of
the Company) will not be deemed a purchase triggering a six-month period of
short-swing liability. The short-swing rules will not subject the acquired
shares to a substantial risk of forfeiture under Section 83 of the Code unless
the shares are disposed of during the six-month period following the date of the
grant of the NSO. If an insider exercises a NSO after such period, the insider
will recognize ordinary income as of the exercise date. If an insider exercises
a NSO during such period, taxation will ordinarily be deferred until the date
six months after the grant date, unless the insider makes an election under
Section 83(b) of the Code to recognize ordinary income at the time of exercise.
The aggregate basis for shares acquired upon exercise of a NSO will be
equal to the fair market value of such shares on the date that governs the
determination of the optionee's ordinary income. The holding period for such
shares will commence on such date and, accordingly, will not include the period
during which the NSO was held.
SALE -- In the event of a sale of shares received upon exercise of a NSO,
any gain or loss after the date on which taxable compensation is recognized by
the optionee in respect of the option exercise will generally be a capital gain
or loss, assuming the shares are held as capital assets. The capital gain or
loss will be a long-term capital gain or loss if the shares were held for more
than one year after the date on which taxable compensation was recognized by the
optionee in respect of the option exercise.
Recent Developments in Taxation of Long-Term Capital Gains
As a consequence of amendments to the Code by the Taxpayer Relief Act of
1997, long-term capital gains recognized upon the disposition of shares acquired
upon exercise of an ISO or NSO will be subject to taxation at a maximum rate of
20% is such shares have been held for more than 18 months after the date of
exercise. If such shares have been held for more than one year after the date of
exercise (but for no more than 18 months), any long-term capital gains
recognized will be subject to taxation at a maximum rate of 28%.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO APPROVE THE
1998 OMNIBUS PLAN.
22
PROPOSAL NO. 3 - APPROVAL OF AMENDMENTS TO DIRECTORS' PLAN
The Company's Board of Directors has adopted, and recommended to the
stockholders for their approval at the Meeting, certain amendments to the
Company's Amended and Restated 1990 Non-Employee Directors' Non-Qualified Stock
Option Plan and the restatement of the entire plan, including such amendments
(as so amended and restated, the "Revised Directors' Plan"). If the Revised
Directors' Plan (including these amendments) is approved the Revised Directors'
Plan will become effective immediately. If adopted, these amendments will amend
the Amended and Restated 1990 Non-Employee Directors' Non-Qualified Stock Option
Plan (the "Original Directors' Plan"), to (i) increase from 300,000 to 450,000
the number of shares of Company Common Stock that may be issued upon exercise
of options granted thereunder (subject to adjustment in the event of stock
dividends; stock splits, reverse stock splits, combinations, reclassifications,
or like changes in the capital structure of the Company), (ii) extend the
periods during which stock options may be exercised after an optionee ceases to
be a director, employee, independent contractor or consultant of the Company,
(iii) conform the "change of control" provisions in the Original Directors'
Plan to those in the Omnibus Plan, and (iv) make certain other changes, all as
more fully set forth in the Revised Directors' Plan.
The Revised Directors' Plan will become effective if it receives the
affirmative vote of the majority of the shares present in person or represented
by proxy at the Meeting and entitled to vote. None of the named executive
officers, directors or director nominees or anyone else has received options
with respect to the proposed increase in the number of shares of Company Common
Stock that may be issued under the Revised Directors' Plan. In the event the
Revised Directors' Plan is not approved by the stockholders at the Company
Meeting, the Revised Directors' Plan will not become effective and the Original
Directors' Plan will remain in full force and effect.
As of April 21, 1998, the closing price of the Company's Common Stock on
the Nasdaq SmallCap Market was $2 5/32.
Set forth below is a summary of the Revised Directors' Plan, which summary
is qualified in its entirety by the actual terms of such plan. The form of the
Revised Directors' Plan to be acted upon by stockholders is set forth in full as
Appendix B to this Proxy Statement and is incorporated herein by reference.
Description of Revised Directors' Plan
Under the Revised Directors' Plan, options may be granted to members of the
Company's Board of Directors who are not employees of the Company and who have
not been employees of the Company for a period of at least one year prior to the
date of grant of an option thereunder ("Non-Employee Directors"). Options also
may be granted under the Revised Directors' Plan to selected employees,
independent contractors and consultants of the Company. The purpose of the
options and other awards issuable under the Revised Directors' Plan is to assist
the Company in attracting and retaining experienced and knowledgeable Non-
Employee Directors, selected employees, independent contractors, and consultants
and to foster a community of interest of such Non-Employee Directors, selected
employees, independent contractors and consultants interests with those of the
Company's stockholders.
Annual Retainer Options
Annual Retainers
----------------
All compensation to be paid to Non-Employee Directors for serving as such,
except for fees for attending any meeting of the Company Board of Directors or
committee thereof and reimbursements related thereto, will be paid pursuant to
the Revised Directors' Plan. Each Non-Employee Director elected at an annual
meeting of stockholders of the Company will automatically be granted options on
the thirteenth trading day after the date of such annual meeting (the "Retainer
Grant Date") to purchase a number of shares of Company Common Stock equal to the
lesser of (a) 2,500 shares and (b) the annual retainer for service as an Non-
Employee Director of the Company multiplied by 80% of the average of the fair
market value of a share of Company Common Stock on the ten trading days
following the third trading day after the date of such annual meeting of
stockholders. If the number of shares of Company Common Stock calculated
pursuant to clause (b) of the immediately preceding sentence exceeds 2,500
shares, each Non-Employee Director will automatically receive on the Retainer
Grant Date, in addition to options to purchase 2,500 shares of Company Common
Stock, a cash payment equal to the remaining portion of the annual retainer not
provided for by the grant of such options.
Pro-Rata Retainers for Non-Employee Directors not Elected at Annual Meeting
---------------------------------------------------------------------------
Each person who is newly elected or appointed an Non-Employee Director, but
not by election at an annual meeting of the Company's stockholders, shall
automatically on the thirteenth trading day after the date of such election or
appointment be granted options to purchase a fixed number of shares of Company
Common Stock equal to the lesser of (a) 2,500 shares and (b) an amount
determined by taking the pro-rated portion of the annual retainer based on the
number of months remaining for the newly elected Non-Employee Director to serve
until the next annual meeting of
23
stockholders divided by 80% of the fair market value of a share of the Company
Common Stock on the ten trading days following the third trading day after the
date of such election or appointment. If the number of shares of Company Common
Stock calculated pursuant to this paragraph exceeds 2,500 shares, each such Non-
Employee Director will also receive, in addition to such number of shares of
Company Common Stock, a cash payment equal to the remaining portion of the
annual retainer not provided for by the grant of such options.
Exercise and Vesting
--------------------
The options granted pursuant to the foregoing terms shall be exercisable at
a per share price of 20% of the average fair market value per share of Company
Common Stock used to calculate such grant. Subject to the provisions regarding
expiration and termination of options, the foregoing options will become
exercisable as to 75% of the shares of Company Common Stock issuable upon
exercise of such options six months after the date of grant and as to 100% of
such shares on the later of six months after the date of grant and December 31
of the year in which the grant is made.
Options for New Non-Employee Directors Elected at Annual Meeting
Each person who is elected or appointed a Non-Employee Director for the
first time at an annual meeting will automatically upon such election or
appointment (the "Automatic Grant Date") be granted an option to purchase 7,500
shares of Company Common Stock ("New Director Options"). The exercise price of
any New Director Options granted under the Revised Directors' Plan will be 100%
of the fair market value of shares of Company Common Stock subject thereto on
the Automatic Grant Date. Subject to the provisions regarding expiration and
termination of options, any New Director Options will become exercisable as to
20% of the shares of Company Common Stock subject thereto on the Automatic Grant
Date and shall become exercisable as to an additional 20% of the shares of
Company Common Stock issuable upon exercise thereof on each of the first,
second, third and fourth anniversaries of such Automatic Grant Date.
General Provisions
Plan Administration
-------------------
The Revised Directors' Plan will be administered by the Compensation
Committee of the Company's Board of Directors (the "Committee"). Subject to the
express provisions of the Revised Directors' Plan, the Committee may make such
rules and establish such procedures as it deems appropriate for the
administration of such plan. In the event of any disagreement as to the
interpretation of the Revised Directors' Plan or any rule or procedure
thereunder, the decision of the Committee shall be final and binding upon all
persons in interest.
Payment Upon Option Exercise
----------------------------
Under the Revised Directors' Plan, all options must be exercised, if at
all, within ten years from their respective dates of grant. The exercise price
of options granted under the Revised Directors' Plan may be paid in cash,
services rendered, personal property (including shares of Company Common Stock
having a fair market value on the date of exercise equal to the option price),
real property, leases of real property or any combination thereof. This
provision permits an optionee not only to use then-held shares of Company Common
Stock in a single exercise of stock options, but also to use the shares of
Company Common Stock received upon the exercise of stock options to exercise
additional stock options in a process known as "pyramiding". Such pyramiding
permits an optionee to effect a cashless exercise of all of the optionee's
options then exercisable (no matter what the number) without surrendering any
shares of Company Common Stock or making any additional cash investment. An
optionee who exercises options by pyramiding will own, after the exercise, a
number of additional shares equal in value to the spread between the fair market
value of a share of Company Common Stock on the date of exercise and the option
exercise price of the options exercised. Not less than ten shares may be
purchased at any time upon the exercise of an option granted under the Revised
Directors' Plan unless the number of shares so purchased constitutes the total
number of shares then issuable upon exercise of the option. During the lifetime
of an optionee, an option may be exercised only by the optionee or such
optionee's legal representative. An option may not be transferred or assigned,
except by will or the laws of descent and distribution.
24
Adjustments
-----------
The exercise price of, and the number of shares issuable upon exercise of,
options granted under the Revised Directors' Plan will be adjusted to reflect
stock dividends, stock splits, reverse stock splits, combinations, other
recapitalizations, reorganizations or reclassifications or changes affecting the
number or kind of outstanding shares of Company Common Stock. The Revised
Directors' Plan also provides for certain adjustments to be made to the
aggregate number of shares which may be issued upon exercise of options granted
under the Revised Directors' Plan in the event of any stock dividends, stock
splits, reverse stock splits, combinations, other recapitalizations,
reorganizations or reclassifications or changes affecting the number or kind of
outstanding shares of Company Common Stock.
In addition, in the event that a "Change in Control" occurs while any
option remains outstanding under the Revised Directors' Plan, all options
granted under such plan that are outstanding as of the time of such change of
control will become immediately exercisable in full, without regard to the time
period that has elapsed from the date of grant or to the vesting provisions.
Generally, a Change in Control will be deemed to occur upon the earlier of (i)
any person or entity becoming the beneficial owner, directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding voting securities, (ii) a change in the
composition of the Board of Directors of the Company during any period of not
more than two consecutive years such that individuals who constitute the Board
of Directors of the Company at the beginning of such period cease for any reason
to constitute at least a majority of such board, (iii) the approval by the
stockholders of the Company of a merger or consolidation of the Company with any
other company whereby the combined voting power of the Company's securities no
longer represents at least 50% of the combined voting power of the surviving or
parent entity outstanding after such merger or consolidation or (iv) the
stockholders of the Company approve a plan of complete liquidation or an
agreement for the sale of all or substantially all of the assets of the Company.
Termination of Eligibility
If an individual to whom options have been granted under the Revised
Directors' Plan ceases to be a director, employee, consultant, or independent
contractor of the Company as the result of a termination without cause (other
than due to death or disability), (A) any options held by such person that were
exercisable on the date of such termination may be exercised by that person
until the later of: (i) a period of one year following the date of such
termination, or (ii) a period of one year from the date any option vests in the
twelve month period following such termination, and (B) any options held by such
person that were not exercisable on the date of such termination will continue
to vest in accordance with their original vesting schedule for a period of 12
months following the date of termination, and any options that vest during such
12-month period may be exercised by that person for a period of one year
following the date of such vesting.
If an individual to whom options have been granted under the Plan ceases to
be a director, employee, consultant, or independent contractor of the Company as
the result of a voluntary resignation (other than due to death or disability),
(A) any options held by such person that were exercisable on the date of such
resignation may be exercised by that person until the later of: (i) a period of
one year following the date of such resignation, or (ii) a period of one year
from the date any option vests in the twelve month period following such
resignation, and (B) any options held by such person that were not exercisable
on the date of such resignation will continue to vest in accordance with their
original vesting schedule for a period of 12 months following the date of
resignation, and any options that vest during such 12-month period may be
exercised by that person for a period of one year following the date of such
vesting, provided that the individual has been an employee, consultant or
director of the Company for at least three years and has signed a non-compete
agreement with the Company (such agreement to include biotechnology companies,
academic and/or research organizations encompassing biotechnology, and venture
capital companies in the biotechnology sector.
If any recipient of an option under the Revised Directors' Plan dies within
the one year period following termination of employment or other relationship,
such optionee's Beneficiary (as defined) may exercise such optionee's options,
to the extent exercisable or vested at the time of death, for a period not to
exceed one year after such date, but in no event later than expiration of such
option's term. If any recipient of an option ceases employment or other
relationship with the Company and its subsidiaries due to death or disability,
such optionee's options may be exercised at any time within 12 months following
the optionee's death or termination of employment or other relationship due to
death or disability, by the optionee, the optionee's legal representative or the
person or persons to whom the optionee's
25
rights under the Revised Directors' Plan shall pass by will or by the laws of
descent or distribution but in no event later than the expiration date of such
option. Shares of Company Common Stock issuable upon exercise of options granted
under the Revised Directors' Plan that have expired or been surrendered or
terminated will be returned to the plan and become available for issuance upon
exercise of future options granted under the plan.
Termination of Plan
-------------------
The Revised Directors' Plan will terminate on April 23, 2008, except with
respect to options outstanding on such date. The Company's Board of Directors
may sooner terminate or amend the Revised Directors' Plan at any time, subject
to its terms; provided, however, that the Board may seek stockholder approval of
an amendment if determined to be required by or advisable under regulations of
the Securities and Exchange Commission or the Internal Revenue Service, the
rules of any stock exchange or system on which the Company Common Stock is
listed or other applicable law or regulation.
Federal Income Tax Consequences
-------------------------------
The Federal income tax consequences of a NSO granted under the Revised
Directors' Plan are the same as the Federal income tax consequences described
for NSOs granted under the 1998 Omnibus Plan, set forth above under "Description
of 1998 Omnibus Plan." With respect to any cash payments received under the
Revised Directors' Plan, the recipient will recognize ordinary income and the
Company will be entitled to a deduction for such cash payment.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO APPROVE THE
REVISED DIRECTORS' PLAN.
26
GENERAL AND OTHER MATTERS
The Board knows of no matter, other than as referred to in this proxy
statement, which will be presented at the Meeting. However, if other matters
properly come before the Meeting, or any of its adjournments, the person or
persons voting the proxies will vote them in accordance with their judgment in
such matters.
INDEPENDENT AUDITORS
Price Waterhouse LLP, independent auditors, audited the financial
statements of the Company for the year ended December 31, 1997. Representatives
of Price Waterhouse LLP are expected to attend the Annual Meeting, will have the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers (including a person performing a principal policy-making
function) and persons who own more than 10% of a registered class of the
Company's equity securities ("10% Holders") to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Directors, officers and 10% Holders are
required by SEC regulations to furnish the Company with copies of all of the
Section 16(a) reports they file. Based solely upon a review of the copies of the
forms furnished to the Company and the representations made by the reporting
persons to the Company, the Company believes that during fiscal 1997 its
directors, officers and 10% Holders complied with all substantive filing
requirements under Section 16(a) of the Exchange Act.
AVAILABLE INFORMATION
THE COMPANY WILL PROVIDE, WITHOUT CHARGE TO EACH PERSON SOLICITED BY THIS
PROXY STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL 1997 (INCLUDING THE FINANCIAL
STATEMENTS, BUT EXCLUDING EXHIBITS), AS FILED WITH THE SEC. SUCH WRITTEN REQUEST
SHOULD BE DIRECTED TO THE CORPORATE SECRETARY AT THE ADDRESS OF THE COMPANY
APPEARING ON THE FIRST PAGE OF THIS PROXY STATEMENT.
STOCKHOLDER PROPOSALS - 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the Annual Meeting of
Stockholders in 1999 must be received by December 24, 1998 in order to be
considered for inclusion in the Company's proxy statement and form of proxy
relating to that Meeting. Stockholder proposals should be directed to the
Corporate Secretary, at the address of the Company set forth on the first page
of this proxy statement.
By Order of the Board of Directors,
Joseph Hernon
Secretary
May 6, 1998
27
APPENDIX A
BOSTON LIFE SCIENCES, INC.
1998 OMNIBUS STOCK OPTION PLAN
1. Purpose; Types of Options; Construction.
---------------------------------------
The purpose of the Boston Life Sciences, Inc. 1998 Omnibus Stock
Option Plan is to afford an incentive to selected employees, consultants,
independent contractors, directors and Scientific Advisors of Boston Life
Sciences, Inc. (the "Company"), or any Subsidiary which now exists or hereafter
is organized or acquired, to acquire a proprietary interest in the Company, to
continue as employees, independent contractors, consultants, directors or
Scientific Advisors, as the case may be, to increase their efforts on behalf of
the Company and to promote the success of the Company's business. The Plan
provides for grants of stock options (including "incentive stock options" and
"nonqualified stock options").
2. Definitions.
-----------
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Beneficiary" means the person, persons, trust or trusts which
have been designated by an Optionee in his or her most recent written
beneficiary designation filed with the Company to receive the benefits specified
under the Plan upon his or her death, or, if there is no designated Beneficiary
or surviving designated Beneficiary, then the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to receive such
benefits.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Committee" means the committee established by the Board to
administer the Plan, the composition of which shall at all times satisfy the
provisions of Rule 16b-3.
(e) "Company" means Boston Life Sciences, Inc., a corporation
organized under the laws of the State of Delaware, or any successor corporation.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings and cases.
(g) "Fair Market Value" per share of Stock as of a particular date
shall mean (i) the closing price per share of Stock on the national securities
exchange or National Market System of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") on which the Stock is principally
traded, for the last preceding date on which there was a sale of such Stock on
such exchange or system, or (ii) if the shares of Stock are not then
traded on any such exchange or system, the average of the closing bid and asked
prices for the shares of Stock quoted on NASDAQ for the last preceding date on
which a sale of Stock was reported, or (iii) if the shares of Stock are not then
traded on an exchange or system or quoted on NASDAQ, such value as the
Committee, in its sole discretion, shall determine.
(h) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(i) "NSO" means any Option that is designated as a nonqualified stock
option or that does not meet the requirements to be an ISO.
(j) "Option" means a right, granted to a Optionee under Section 6(b),
to purchase shares of Stock. An Option may be either an ISO or an NSO, provided
that ISO's may not be granted to independent contractors or Scientific Advisors.
(k) "Option Agreement" means any written agreement, contract, or
other instrument or document evidencing the grant of an Option.
(l) "Optionee" means a person who, as an employee, Scientific
Advisor, director, consultant or independent contractor of the Company or a
Subsidiary has been granted an Option under the Plan.
(m) "Plan" means this Boston Life Sciences, Inc. 1998 Omnibus Stock
Option Plan, as amended from time to time.
(n) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
promulgated by the Securities and Exchange Commission under Section 16 of the
Exchange Act, including any successor to such Rule.
(o) "Scientific Advisor" means any member of the Scientific Advisory
Board who neither (i) is an employee of the Company, nor (ii) receives
compensation from the Company pursuant to a research, sponsored research or
similar agreement with the Company (other than a Scientific Advisory and
Consulting Agreement entered into generally by the Company and members of the
Scientific Advisory Board which may provide for compensation for each meeting of
the Scientific Advisory Board which the Scientific Advisor attends and for the
reimbursement of certain expenses), nor (iii) is the discoverer of, or a
principal investigator or researcher with respect to, any technology subject to
the Company's research and development programs as determined by the Committee
in its sole discretion.
(p) "Scientific Advisory Board" means the Board of Scientific
Advisors of the Company.
(q) "Stock" means shares of the common stock, par value $.01 per
share, of the Company.
(r) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of granting of an
Option, each of the corporations
2
(other than the last corporation in the unbroken chain) owns stock possessing
50% or more of the total combined voting power of all classes of stock in one of
the other corporations in the chain.
(s) "Ten Percent Stockholder" shall mean a prospective optionee of
the Company who, at the time an ISO is to be granted to such optionee, owns
(within the meaning of Section 422(b)(6) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company.
3. Administration.
--------------
The Plan shall be administered by the Committee. The Committee shall
have the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Options; to determine the persons to whom and
the time or times at which Options shall be granted; to determine the type and
number of Options to be granted, the number of shares of Stock to which an
Option may relate and the terms and conditions relating to any Option; and to
determine whether, to what extent, and under what circumstances an Option may be
settled, cancelled, forfeited, exchanged, or surrendered; to make adjustments in
the terms and conditions of Options in recognition of unusual or nonrecurring
events affecting the Company or any Subsidiary or the financial statements of
the Company or any Subsidiary, or in response to changes in applicable laws,
regulations, or accounting principles; to construe and interpret the Plan and
any Option Agreement; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the Option
Agreements (which need not be identical for each Optionee); and to make all
other determinations deemed necessary or advisable for the administration of the
Plan.
The Committee may appoint a chairperson and a secretary and may make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written consent. The
Committee may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Committee or any
person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including the Company, and any Subsidiary or Optionee (or any person claiming
any rights under the Plan from or through any Optionee) and any stockholder.
No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any Option
granted hereunder.
4. Eligibility.
-----------
Options may be granted to selected employees, Scientific Advisors,
directors, consultants and independent contractors of the Company and its
present or future Subsidiaries, in the discretion of the Committee.
3
5. Stock Subject to the Plan.
-------------------------
The maximum number of shares of Stock that may be issued under the
Plan shall be 500,000.
In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, Stock, or other property),
recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Optionees under the Plan, then the Committee shall make such equitable
changes or adjustments as it deems necessary or appropriate to any or all of (i)
the number and kind of shares of Stock which may thereafter be issued in
connection with Options, (ii) the number and kind of shares of Stock issuable in
respect of outstanding Options, and (iii) the exercise price relating to any
Option; provided that, with respect to ISOs, such adjustment shall be made in
-------- ----
accordance with Section 424(h) of the Code.
6. Specific Terms of Options.
-------------------------
(a) General. The Committee may impose on any Option or the exercise
-------
thereof, at the date of grant or thereafter, such additional terms and
conditions, not inconsistent with the provisions of the Plan, as the Committee
shall determine.
(b) Options. The Committee is authorized to grant Options to
-------
Optionees on the following terms and conditions:
(i) Type of Option. The Option Agreement evidencing the grant
--------------
of an Option under the Plan shall designate the Option as an ISO or an
NSO.
(ii) Exercise Price. The exercise price per share of Stock
--------------
purchasable under an Option shall be determined by the Committee;
provided that, in the case of an ISO, except as set forth in Section
-------- ----
6(c)(ii), such exercise price shall be not less than the Fair Market
Value of a share on the date of grant of such Option, and, in the case
of an NSO, such exercise price shall be not less than 50% of the Fair
Market Value of a share on the date of grant of such Option, but in no
event shall the exercise price for the purchase of shares be less than
par value. The exercise price for Stock subject to an Option may be
paid in cash or, at the discretion of the Committee, by an exchange of
Stock previously owned by the Optionee, or a combination of both, in
an amount having a combined value equal to such exercise price. An
Optionee may also elect to pay all or a portion of the aggregate
exercise price by having shares of Stock with a Fair Market Value on
the date of exercise equal to the aggregate exercise price withheld by
the Company or sold by a broker-dealer under circumstances meeting the
requirements of 12 C.F.R. (S)220 or any successor thereof.
(iii) Term and Exercisability of Options. Except as set forth in
Section
4
6(c)(ii) hereof, the term of each Option shall be up to ten (10) years
from the date of grant of such Option. The date on which the Committee
adopts a resolution expressly granting an Option, or such other date
as is set forth in such resolution, shall be considered the day on
which such Option is granted. Options shall be exercisable over the
exercise period, at such times and upon such conditions as the
Committee may determine, as reflected in the Option Agreement;
provided that, the Committee shall have the authority to accelerate
-------- ----
the exercisability of any outstanding Option at such time and under
such circumstances as it, in its sole discretion, deems appropriate.
An Option may be exercised to the extent of any or all full shares of
Stock as to which the Option has become exercisable, by giving written
notice of such exercise to the Committee or its designated agent;
provided that, no Option may be exercised for fewer than 10 shares of
-------- ----
Stock unless the number of shares with respect to which the Option is
exercised constitutes the total number of shares as to which the
Option is then exercisable.
(iv) Termination of Employment or Other Relationship.
-----------------------------------------------
(a) If an Optionee ceases to be an employee, independent
contractor, consultant, Scientific Advisor or director
of the Company as the result of a termination without
cause (other than due to death or disability), his
options will continue to vest for a period of one year
pursuant to the vesting schedule established at the
time the Option was granted and (A) any Options held by
such Optionee that were exercisable on the date of such
termination may be exercised by the Optionee until the
later of: i) one year following the date of such
termination, or, ii) one year from the date any Option
vests in the twelve month period following such
termination and (B) any Options held by such Optionee
that vested during the 12 months following the date of
termination may be exercised by the Optionee for a
period of one year following the date of such vesting.
(b) If an Optionee ceases to be an employee, consultant,
independent contractor, Scientific Advisor or director
of the Company as the result of a voluntary resignation
(other than due to death or disability), his options
will continue to vest for a period of one year pursuant
to the vesting schedule established at the time the
Option was granted and provided that the Optionee has
been an employee, consultant, independent contractor,
Scientific Advisor or director of the Company for at
least three years and has signed a non-compete
agreement with the Company (such agreement to include
biotechnology companies, academic and/or research
organizations encompassing biotechnology, and venture
capital companies in the biotechnology sector), and (A)
any Options held by such Optionee that were
5
exercisable on the date of such resignation may be
exercised by the Optionee until the later of: i) one
year following the date of such resignation, or, ii)
one year from the date any Option vests in the twelve
month period following such resignation and (B) any
Options held by such Optionee that vested during the 12
months following the date of resignation may be
exercised by the Optionee for a period of one year
following the date of such vesting.
provided, that, if the Optionee dies within such one-year period
-------- ----
following termination of employment or other relationship, the Option
(to the extent exercisable at the time of death) shall be exercisable
by the Optionee's Beneficiary for a period of one (1) year following
the Optionee's death (but in no event after the expiration date of the
Option), and shall thereafter terminate.
(v) Death or Disability. If the Optionee's employment or other
-------------------
relationship with the Company is terminated because of death or
disability, the Optionee (or, where applicable, the Beneficiary) will
be entitled to exercise the Option with respect to the total number of
shares of Stock subject to such Option and without regard to the
extent to which such Option was exercisable at the time of the
termination of employment or other relationship due to death or
disability for a period of one (1) year following the Optionee's death
or termination of employment or other relationship due to death or
disability (but in no event after the expiration date of the Option),
and the Option shall thereafter terminate.
(vi) Other Provisions. Options may be subject to such other
----------------
conditions including, but not limited to, restrictions on
transferability of the shares acquired upon exercise of such Options,
as the Committee may prescribe in its discretion.
(c) Incentive Stock Options. Options granted as ISOs shall be subject
-----------------------
to the following special terms and conditions, in addition to the general terms
and conditions specified in this Section 6.
(i) Value of Shares. The aggregate Fair Market Value (determined
---------------
as of the date the ISO is granted) of the shares of Stock with respect
to which ISOs granted under this Plan and all other plans of the
Company become exercisable for the first time by each Optionee during
any calendar year shall not exceed $100,000.
(ii) Ten Percent Stockholder. In the case of an ISO granted to a
-----------------------
Ten Percent Stockholder, (x) the exercise price shall not be less than
one hundred ten percent (110%) of the Fair Market Value of the shares
of Stock on the date of grant of such ISO, and (y) the exercise period
shall not exceed five (5) years from the date of grant of such ISO.
6
7. General Provisions.
------------------
(a) Compliance with Local and Exchange Requirements. The Plan, the
-----------------------------------------------
granting and exercising of Options thereunder, and the other obligations of the
Company under the Plan and any Option Agreement or other agreement shall be
subject to all applicable federal and state laws, rules and regulations, and to
such approvals by any regulatory or governmental agency as may be required. The
Company, in its discretion, may postpone the issuance or delivery of Stock under
any Option until completion of such stock exchange listing or registration or
qualification of such Stock or other required action under any state, federal or
foreign law, rule or regulation as the Company may consider appropriate, and may
require any Optionee to make such representations and furnish such information
as it may consider appropriate in connection with the issuance or delivery of
Stock in compliance with applicable laws, rules and regulations.
(b) Nontransferability. Options shall not be transferable by an
------------------
Optionee except by will or the laws of descent and distribution or, if then
permitted under Rule 16b-3, pursuant to a qualified domestic relations order as
defined under the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder, and shall be exercisable during
the lifetime of an Optionee only by such Optionee or his guardian or legal
representative.
(c) No Right to Continued Employment, etc. Nothing in the Plan or in
--------------------------------------
any Option granted or any Option Agreement or other agreement entered into
pursuant hereto shall confer upon any Optionee the right to continue in the
employ of or to continue as an independent contractor or Scientific Advisor of
the Company or any Subsidiary or to be entitled to any remuneration or benefits
not set forth in the Plan or such Option Agreement or other agreement or to
interfere with or limit in any way the right of the Company or any such
Subsidiary to terminate such Optionee's employment, independent contractor or
Scientific Advisor relationship.
(d) Taxes. The Company or any Subsidiary is authorized to withhold
-----
from any distribution of Stock, or any other payment to a Optionee, amounts of
withholding and other taxes due in connection with any transaction involving an
Option, and to take such other action as the Committee may deem advisable to
enable the Company and Optionees to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any Option. This
authority shall include authority to withhold or receive Stock or other property
and to make cash payments in respect thereof in satisfaction of a Optionee's tax
obligations.
(e) Amendment and Termination of the Plan. The Board may at any time
-------------------------------------
and from time to time alter, amend, suspend, or terminate the Plan in whole or
in part; provided that, the Company will seek stockholder approval if the Board
-------- ----
of Directors determines that it is necessary or desirable in order to comply
with the Code, federal or state securities law or any other applicable rules or
regulations in which case such amendment shall not be effective unless the same
shall be approved by the requisite vote of the stockholders of the Company
entitled to vote thereon. Notwithstanding the foregoing, no amendment shall
affect adversely any of the rights of any Optionee, without such Optionee's
consent, under any Option theretofore granted under the Plan.
7
(f) Change in Control. Notwithstanding any other provision of the
-----------------
Plan to the contrary, if, while any Options remain outstanding under the Plan, a
"Change in Control" of the Company (as defined in this Section 7(f)) shall
occur, all Options granted under the Plan that are outstanding at the time of
such Change in Control shall become immediately exercisable in full, without
regard to the years that have elapsed from the date of grant.
For purposes of this Section 7(f), a Change in Control of the Company
shall occur upon the happening of the earliest to occur of the following:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than (1) the Company, (2) any trustee
or other fiduciary holding securities under an employee benefit plan
of Company, or (3) any corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions
as their ownership of Stock (each an "excluded person"), is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such person any
securities acquired directly from the Company or its affiliates)
representing 30% or more of the combined voting power of the Company's
then outstanding voting securities;
(ii) during any period of not more than two consecutive years,
individuals who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in clause (i), (iii), or (iv) of this paragraph (f)) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved (other than approval given in connection
with an actual or threatened proxy or election contest), cease for any
reason to constitute at least a majority of the Board;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
(A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or parent entity)
50% or more of the combined voting power of the voting securities of
the Company or such surviving or parent entity outstanding immediately
after such merger or consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquired
30% or more of the combined voting power of the Company's then
outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the
8
Company of all or substantially all of the Company's assets (or
any transaction having a similar effect).
(g) No Rights to Options; No Stockholder Rights. No Optionee shall
-------------------------------------------
have any claim to be granted any Option under the Plan, and there is no
obligation for uniformity of treatment of Optionees. Except as provided
specifically in the applicable Option Agreement, an Optionee or Beneficiary
shall have no rights as a stockholder with respect to any shares covered by the
Option until the date of exercise of the Option.
(h) No Fractional Shares. No fractional shares of Stock shall be
--------------------
issued or delivered pursuant to the Plan or any Option. The Committee shall
determine whether cash, other Options, or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(i) Governing Law. The Plan and all determinations made and actions
-------------
taken pursuant hereto shall be governed by the laws of the State of Delaware
without giving effect to the conflict of laws principles thereof.
(j) Term of the Plan. The Plan shall terminate on April 23, 2008,
----------------
except with respect to Options outstanding on such date and no Option may be
granted thereafter.
9
APPENDIX B
BOSTON LIFE SCIENCES, INC. AMENDED AND RESTATED
1990 NON-EMPLOYEE DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN
1. Objectives
----------
The objectives of the Boston Life Sciences, Inc. Amended and Restated
1990 Non-Employee Directors' Non-Qualified Stock Option Plan (as amended from
time to time, the "Plan") are to assist Boston Life Sciences, Inc. (the
"Company") in attracting and retaining experienced and knowledgeable independent
Directors, to further promote the identification of such Directors' interests
with those of the Company's stockholders, and to attract and retain experienced
and knowledgeable employees, independent contractors and consultants. The
Boston Life Sciences, Inc. Amended and Restated 1990 Non-Employee Directors'
Non-Qualified Stock Option Plan is hereby amended and restated for a second
time.
2. Maximum Number of Shares to be Optioned and Adjustments in
----------------------------------------------------------
Optioned Shares
---------------
The maximum number of shares of common stock, par value $.01 per share
(the "Common Stock"), of the Company which may be issued hereunder is 450,000
(the "Shares"). Notwithstanding any other provisions of the Plan to the
contrary, the number of Shares subject to option, the number of Shares
previously optioned and not theretofore delivered and the option price per Share
shall be adjusted if the number of outstanding Shares of the Company is
increased or reduced by split-up, reclassification, stock dividend or the like.
3. Administration and Interpretation
---------------------------------
The Plan shall be administered by a committee (the "Committee")
appointed by the Board of Directors of the Company (the "Board"). Subject to
the express provisions of the Plan, the Committee may make such rules and
establish such procedures as it deems appropriate for the administration of the
Plan. In the event of any disagreement as to the interpretation of the Plan or
any rule or procedure thereunder, the decision of the Committee shall be final
and binding upon all persons in interest.
4. Annual Grant of Options
-----------------------
Each member (a "Director") of the Board who is not an employee of the
Company and who has not been an employee of the Company for a period of at least
one year prior to the date of grant of an option under the Plan (a "Non-Employee
Director") shall automatically be granted an option on the thirteenth trading
day after the date of the annual meeting of stockholders of the Company
("Retainer Grant Date") to purchase such number of Shares equal to the lesser of
(a) 2,500 Shares and (b) the quotient of the annual retainer for service as a
Non-Employee Director of the Company and 80% of the average of the fair market
value of a share of Common Stock on the ten trading days following the third
trading day after the date of
such annual meeting of stockholders of the Company (such average a "Ten Day
Average-Value"). If the number of Shares calculated pursuant to clause (b) of
the immediately preceding sentence exceeds 2,500, each Non-Employee Director
entitled to receive Shares under this paragraph of Section 4 will automatically
receive on the Retainer Grant Date a cash payment equal to the annual retainer
minus the product of 2,500 and 80% of the Ten Day Average Value. The "fair
market value" of Shares shall be determined to be the closing price per Share on
the principal national securities exchange on which the Share is listed or
admitted to trading, or, if not listed or traded on any such exchange, on the
Nasdaq National Market, or if not listed or traded on any such exchange or
system, the average of the bid and asked price per Share on Nasdaq or, if such
quotations are not available, the fair market value of a Share as determined in
good faith by the Committee, which determination shall be conclusive.
Each person who is newly elected or appointed a Non-Employee Director
after the Company's annual meeting of stockholders held in 1995, but not by
election at a subsequent Company annual meeting of stockholders, shall
automatically, on the thirteenth trading day after the date of such election or
appointment (the "Mid-Year Grant Date"), be granted options to purchase such
number of Shares equal to the lesser of (a) 2,500 Shares and (b) the quotient of
(i) the product of (x) the annual retainer for service as a Director of the
Company and (y) a fraction (the "Fraction"), the numerator of which is the
number of whole months from the date of such election or appointment as a Non-
Employee Director until the date of the next annual meeting of stockholders and
the denominator of which is 12 (such product hereinafter known as the "Mid-Year
Retainer Amount") and (ii) 80% of the average of the fair market value of a
Share on the ten trading days following the third trading day after the date of
such election or appointment (such average a "Mid-Year Ten Day Average Value").
If the number of Shares calculated pursuant to clause (b) of the immediately
preceding sentence exceeds 2,500, each Non-Employee Director entitled to receive
Shares under this paragraph of Section 4 will automatically receive on the Mid-
Year Grant Date a cash payment equal to the MidYear Retainer Amount minus the
product of 2,500 and 80% of the MidYear Ten Day Average Value.
5. Grants to New Non-Employee Directors
------------------------------------
Each Non-Employee Director who, after the Company's annual meeting of
stockholders held in 1994, is elected or appointed to the Board for the first
time, and who was not immediately prior to such date serving on the Board of
Directors of Boston Life Sciences, Inc., will, at the time such director is
elected or appointed and duly qualified, be granted automatically (the
"Automatic Grant Date") an option to purchase 7,500 Shares.
6. Grants to Employees, Consultants, and Independent Contractors
-------------------------------------------------------------
The Board may, in its discretion grant stock options under the
Director Plan to any employee, independent contractor or consultant of the
Company (each, an "Employee") or to any Non-Employee Director, and such options
will have the terms and conditions set by the Board at the time the option is
granted.
2
7. Option Terms
------------
Subject to the limitations prescribed in Sections 4 and 5 above, the
options granted under the Plan shall be on the terms stated in subsections 7(a)
through (g) below.
(a) The option exercise price per share for options granted
pursuant to Section 4 of this Plan shall be 20% of the Ten Day Average Value or
Mid-Year Ten Day Average Value per Share, as appropriate. The option exercise
price per share for options granted pursuant to Section 5 of this Plan shall be
100% of the fair market value of a share of Common Stock on the Automatic Grant
Date.
(b) Subject to the provisions herein regarding expiration or
termination of options, an option granted pursuant to Section 4 of the Plan
shall become exercisable as to 75% of the Shares subject thereto six months
after the Retainer Grant Date or Mid-Year Grant Date of the option, as
appropriate, and shall become exercisable as to 100% of the Shares subject
thereto on the later of six months after the Retainer Grant Date or Mid-Year
Grant Date, as appropriate, and December 31 of the year in which the option is
granted. Subject to the provisions herein regarding expiration or termination
of options, an option granted pursuant to Section 5 of the Plan shall be
exercisable as to 20% of the Shares subject thereto on the Automatic Grant Date
of the option, and shall become exercisable as to an additional 20% of the
Shares subject thereto each of the first, second, third and fourth anniversaries
of such Automatic Grant Date. No partial exercise of the option may be for less
than 10 full Shares, unless the number of shares so purchased constitutes the
total number of shares then purchasable under such option. In no event shall
the Company be required to issue fractional Shares.
(c) Notwithstanding any other provisions of the Plan to the
contrary, no option shall be granted later than ten years after the date the
Plan is adopted by the Board.
(d) The option price shall be payable in cash, services
rendered, personal property (including Shares having a fair market value equal
to the option price), real property, leases of real property or any combination
thereof.
(e) The option shall not be transferable otherwise than by will
or the laws of descent and distribution and shall be exercisable, during the
optionee's lifetime, only by such optionee or the optionees Representative (as
hereinafter defined).
(f) The option shall expire ten years after the date of grant,
unless an earlier date is fixed by operation of Section 7 hereof.
(g) Change in Control
-----------------
Notwithstanding any other provision of the Plan to the contrary,
if, while any options remain outstanding under the Plan, a "Change in Control"
of the Company (as defined in this Section 7(g)) shall occur, all options
granted under the Plan that are outstanding at
3
the time of such Change in Control shall become immediately exercisable in full,
without regard to the years that have elapsed from the date of grant.
For purposes of this Section 7(g), a Change in Control of the Company
shall occur upon the happening of the earliest to occur of the following:
(i) any "person," as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than (1) the Company, (2) any trustee or
other fiduciary holding securities under an employee benefit plan of Company, or
(3) any corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of Stock (each
an "excluded person"), is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such person any
securities acquired directly from the Company or its affiliates) representing
30% or more of the combined voting power of the Company's then outstanding
voting securities;
(ii) during any period of not more than two consecutive
years, individuals who at the beginning of such period constitute the Board, and
any new director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described in clause
(i), (iii), or (iv) of this paragraph (g)) whose election by the Board or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved (other than approval given in connection
with an actual or threatened proxy or election contest), cease for any reason to
constitute at least a majority of the Board;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
(A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or parent entity)
50% or more of the combined voting power of the voting securities of
the Company or such surviving or parent entity outstanding immediately
after such merger or consolidation, (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquired
30% or more of the combined voting power of the Company's then
outstanding securities or (C) the transaction contemplated by the
Merger Agreement (as defined below); or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).
4
8. Exercise Rights upon Ceasing to be a Director, Employee,
--------------------------------------------------------
Independent Contractor or Consultant
- ------------------------------------
(a) In the event that a Director, employee, independent
contractor or consultant ceases to serve as a Director, employee, independent
contractor or consultant of the Company and its subsidiaries due to death or
Disability (as hereinafter defined), such optionee's options may be exercised at
any time within 12 months following such optionee's death or Disability (subject
to the limitations prescribed in Sections 4 or 5, as appropriate, and subsection
7(f) above) by the optionee, the optionee's legal representative or the person
or persons to whom the optionee's rights under the options shall pass by will or
by the laws of descent or distribution (each a "Representative"), but only to
the extent that the optionee's options were exercisable on the date of such
optionee's death or Disability.
(b) If an optionee ceases to be a Director, employee,
independent contractor or consultant of the Company as the result of a
termination without cause (other than due to death or Disability), his options
will continue to vest for a period of one year pursuant to the vesting schedule
established at the time the option was granted, and (A) any options held by such
optionee that were exercisable on the date of such termination may be exercised
by the optionee until the later of: i) one year following the date of such
termination, or ii) one year from the date any option vests in the twelve month
period following such termination, and (B) any options held by such optionee
that vested during the 12-month period following the date of termination may be
exercised by the optionee for a period of one year following the date of such
vesting (subject to the limitations prescribed in Sections 4 or 5, as
appropriate, and subsection 7(f) above).
(c) If an optionee ceases to be an employee, independent
contractor, consultant or director of the Company as the result of a voluntary
resignation (other than due to death or disability), his options will continue
to vest for a period of one year pursuant to the vesting schedule established at
the time the option was granted, provided that the optionee has been an
employee, independent contractor, consultant or director of the Company for at
least three years and has signed a non-compete agreement with the Company (such
agreement to include biotechnology companies, academic and/or research
organizations encompassing biotechnology, and venture capital companies in the
biotechnology sector), and (A) any options held by such optionee that were
exercisable on the date of such resignation may be exercised by the optionee
until the later of: i) one year following the date of such resignation, or ii)
one year from the date any option vests in the twelve month period following
such resignation, and (B) any options held by such optionee that vested during
the 12-month period following the date of resignation may be exercised by the
optionee for a period of one year following the date of such vesting (subject to
the limitations prescribed in Sections 4 or 5, as appropriate, and subsection
7(f) above).
provided, that, if the optionee dies within such one-year period following
- -------- ----
termination of employment or other relationship, the option (to the extent
exercisable at the time of death) shall be exercisable by the optionee's
Beneficiary for a period of one (1) year following the optionee's
5
death (but in no event after the expiration date of the option), and shall
thereafter terminate.
The provisions of this paragraph 8 shall not apply to options held by
any person who was a Non-Employee Director of the Company prior to the Effective
Date of the Merger (as those terms are defined in the Agreement of Merger by and
between Greenwich Pharmaceuticals Incorporated and Boston Life Sciences, Inc.,
dated August 8, 1994 (the "Merger Agreement") and who resigns as such director
of the Company immediately after such Effective Date. Any options issued to the
persons identified in the immediately preceding sentence and that remain
outstanding as of the Effective Date will remain outstanding for the remainder
of their respective terms not to exceed ten years from the date of grant. The
term "Disability" shall mean the inability, due to illness or injury, to engage
in any gainful occupation for which the individual is suited by education,
training or experience, which condition continues for at least six months.
9. Exercise and Additional Requirements
------------------------------------
Any optionee or Representative exercising an option may exercise the
option (to the extent exercisable as of such date) by delivery to the Company of
(a) written notice of exercise of the option as to a specified number of Shares;
and (b) payment of the option exercise price for such Shares.
Upon the exercise of an option granted hereunder the Board may require
the optionee or Representative, as the case may be, exercising the option to
deliver the following:
(a) A written statement that the optionee or Representative, as the
case may be, is purchasing the Shares for investment and not with a view toward
their distribution or sale and will not sell or transfer any Shares received
upon the exercise of the option except in accordance with the Securities Act of
1933, as amended, and applicable state securities laws;
(b) Evidence reasonably satisfactory to the Company that, at the time
of exercise, the optionee or Representative, as the case may be, meets such
other requirements as the Board of Directors may determine;
(c) Evidence reasonably satisfactory to the Company that, at the time
of exercise, the exercise of the option by the optionee or Representative, as
the case may be, and the delivery of Shares by the Company comply with all
applicable federal and state securities laws; and
(d) Evidence reasonably satisfactory to the Company that, at the time
of exercise of the option by the optionee, such optionee has complied with the
requirements of all applicable federal, state and local income tax withholding
laws.
6
10. Common Stock Subject to Option
------------------------------
The Shares issuable upon exercise of options granted hereunder may be
unissued shares of treasury shares, including shares bought on the open market.
The Company at all times during the term of the Plan shall reserve for issuance
the number of Shares issuable upon exercise of options granted hereunder.
11. Compliance with Governmental and Other Regulations.
--------------------------------------------------
The Company will not be obligated to issue and sell the Shares issued
pursuant to options granted hereunder if, in the opinion of its counsel, such
issuance and sale would violate any applicable federal or state securities laws.
The Company will seek to obtain from each regulatory commission or agency having
jurisdiction such authority as may be required to issue and sell Shares issuable
upon exercise of any option granted hereunder. Inability of the Company to
obtain from any such regulatory commission or agency authority which counsel to
the Company deems necessary for the lawful issuance and sale of Shares upon
exercise of an option granted hereunder shall relieve the Company from any
liability for failure to issue and sell such Shares until the time when such
authority is obtained or is obtainable.
12. Nonassignment of Options
------------------------
Except as otherwise provided in subsection 6(e) hereof, any option
granted hereunder and the rights and privileges conferred hereby shall not be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) and shall not be subject to execution, attachment or
similar process. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of such option, right or privilege contrary to the provisions
hereof, or upon the levy of any attachment or similar process upon the rights
and privileges conferred hereby, such option and the rights and privileges
conferred hereby shall immediately terminate.
13. Rights of Optionee in Stock
---------------------------
Neither any optionee nor the Representative, heirs, legatees or
distributees of any optionee, shall be deemed to be the holder of, or to have
any of the rights of a holder with respect to any Shares issuable upon exercise
of an option granted hereunder unless and until such Shares are issued to such
optionee or Representative, as the case may be, and a certificate has been
issued therefor.
14. Delivery of Shares Issued Pursuant to Option
--------------------------------------------
Subject to the other terms and conditions of the Plan, upon the
exercise of an option granted hereunder, the Company shall sell and deliver to
the optionee or Representative, as the case may be, the Shares with respect to
which the option has been exercised.
7
15. Withholding of Applicable Taxes
-------------------------------
The Company shall have the right to reduce the number of Shares
otherwise required to be issued upon exercise of an option granted hereunder by
an amount equal to all federal, state, city or other taxes as shall be required
to be withheld by the Company pursuant to any statute or other governmental
regulation or ruling divided by the fair market value per Share on the date of
such exercise (or such other date as may be required under applicable law). In
connection with such withholding, the Company may make any such arrangements as
are consistent with the Plan as it may deem appropriate.
16. Plan and Options Not to Affect Directorship
-------------------------------------------
Neither the Plan nor any option granted hereunder shall confer upon
any individual any right to continue as a Director of the Company.
17. Amendment of Plan
-----------------
The Board may make any amendments to the Plan which it deems necessary
or advisable, provided that the Board may seek stockholder approval of an
amendment if it is determined to be required by or advisable under regulations
of the Securities and Exchange Commission or the Internal Revenue Service, the
rules of any stock exchange or system on which the Company's capital stock is
listed or other applicable law or regulation.
18. Notices
-------
Any notice required or permitted hereunder shall be in writing and
shall be sufficiently given only (i) if personally delivered, (ii) if sent by
telex or facsimile, provided that "answer back" confirmation is received by
sender or (iii) upon receipt, if sent by registered or certified mail, postage
prepaid, addressed to the Company, c/o Boston Life Sciences, Inc., 31 Newbury
Street, Suite 300, Boston, Massachusetts 02116 and to the optionee at the
address on file with the Company at the time of grant hereunder, or to such
other address as either party may hereafter designate in writing by notice
similarly given by one party to the other.
19. Successors
----------
The Plan shall be binding upon and inure to the benefit of any
successor or successors of the Company.
20. Severability
------------
If any part of the Plan shall be determined to be invalid or void in
any respect, such determination shall not affect, impair, invalidate or nullify
the remaining provisions of the Plan which shall continue in full force and
effect.
8
21. Governing Law
-------------
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware without giving effect to
the conflict of laws principles thereof.
22. Termination of the Plan
-----------------------
The Board may terminate the Plan at any time; otherwise the Plan shall
terminate on April 23, 2008. Termination of the Plan shall not deprive
optionees of their rights under previously granted options.
9
PROXY
BOSTON LIFE SCIENCES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
-----------------------------------------------------------
The undersigned hereby appoints S. David Hillson, Esq. and Marc E. Lanser,
M.D., and each of them, with power of substitution in each, proxies to appear
and vote all common stock and/or preferred stock of the undersigned in Boston
Life Sciences, Inc. (the "Company") at the Annual Meeting of Stockholders to be
held on June 12, 1998, and at all postponements and adjournments thereof, upon
the matters described below, hereby revoking any proxy heretofore executed by
the undersigned to vote (i) as specified by the undersigned below and (ii) in
the discretion of any proxy upon such other business as may properly come before
the meeting.
The proxies are directed to vote as follows:
PROPOSAL NUMBER 1 - Election Of Directors.
Withhold
Name Vote For Authority to Vote
---- -------- -----------------
Colin B. Bier, Ph.D. [_] [_]
Edson D. de Castro [_] [_]
S. David Hillson, Esq. [_] [_]
Marc E. Lanser, M.D. [_] [_]
Adrian Gerber [_] [_]
Ira W. Lieberman, Ph.D. [_] [_]
E. Christopher Palmer, CPA [_] [_]
PROPOSAL NUMBER 2 - Approval and Adoption of the Company's 1998 Omnibus Stock
Option Plan.
[_] For [_] Against [_] Abstain
PROPOSAL NUMBER 3 - Approval of the Amendment and Restatement of the Company's
Amended and Restated 1990 Non-Employee Directors' Non-Qualified Stock Option
Plan.
[_] For [_] Against [_] Abstain
This Proxy, when properly executed, will be voted in the manner as directed
herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" PROPOSALS 1, 2 and 3.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL
MEETING, PROXY STATEMENT AND ANNUAL REPORT OF BOSTON LIFE SCIENCES, INC.
Dated: _______________, 1998
_________________________________________
Signature of Stockholder
_________________________________________
Signature of Stockholder
Please sign your name exactly as it appears
hereon. When signing as attorney-in-fact,
executor, administrator, trustee or
guardian, please add your title as such.
When signing as joint tenants, all parties
in the joint tenancy must sign. If signer
is a corporation, please sign in full
corporate name by duly authorized officer or
officers and affix the corporate seal.